Ukjraine would not be on my radar screen but for the analyses of Stratfor in the past few years. Beginning today Stratfor is starting an extended analysis of the situation in Ukraine, its pivotal role in US-Russia and Euro- Russian relations and so I begin this thread.

============Part 1: Instability in a Crucial CountryStratfor Today » November 18, 2008 | 1205 GMT SummaryUkraine is a country at a crossroads. Not only is it among those being hit hardest by the current global financial crisis, but it is now flirting with actual dissolution. The country’s economy is fundamentally weak, and ongoing political strife has made economic reforms necessary but impossible. Furthermore, the country is the cornerstone of the geopolitical battle between the West and Russia. Its weakness makes Ukraine dependent on outside powers, but outside powers appear to be working to pull the country apart.

AnalysisEditor’s Note: This is the first part of a series on Ukraine.

Of all the countries being hit by the global financial crisis, Ukraine is one of the most profoundly affected because it is already coping with failing financial institutions, a collapsing economy and a domestic political scene too shattered to handle much of anything. On top of that, it is unfortunate enough to be the centerpiece of the geopolitical turf war between Russia and the West. In short, Ukraine is so deeply troubled that it cannot exist or remain united as a state unless an outside power enables it. And right now, outside powers are doing just the opposite.

The Current Financial CrisisUkraine is fundamentally unprepared to weather the global financial crisis. The country’s budget deficit is 2.8 percent of gross domestic product (GDP) and is likely to increase before it decreases, as declining industrial output triggered by the global recession will inevitably reduce expected tax receipts. Confounding the budget deficit is the parliament’s promise to increase minimum wages in 2009 — a promise that no party will want to back out of publicly when parliamentary and presidential elections could be held soon.

Related LinkCountries in Crisis Ukrainian currency problems are also quite severe. Foreign investment has been leaving Ukraine’s equity markets (it declined almost 80 percent so far in 2008; only Iceland experienced a larger drop) and speculators have been attacking the currency, the hryvnia. The hryvnia has lost 20 percent of its value in the last month alone, and there are fears that a devaluation is on the way. As confidence inside Ukraine slides, bank runs are taking place; Ukraine’s Central Bank President Vladimir Stelmakh estimated that customers withdrew almost $3 billion — approximately 4 percent of the country’s total deposits — from accounts within a week.

As the hryvnia’s decline continues, all loans — both business and private — taken out in foreign currencies (whether Swiss franc, euro or dollar) will begin appreciating, creating a very real possibility of defaults that domestic banks will not be able to cover.

This brings up the issue of total public and private sector debt. Ukraine’s debt is not exorbitant (private sector debt is at $80 billion and public is $20 billion; combined, it is a moderately high 66 percent of GDP), but it is the speed with which it has accumulated over the past two years that is worrying. With the decline in the hryvnia and upcoming debt service payments (around $46 billion due next year for private sector and $1.6 billion for public), Ukrainian total foreign currency reserves — totaling $37 billion — could begin drying up fast, particularly if the government continues to try to use the reserves to prop up the hryvnia.

Ukraine’s public sector debt, currently only 10 percent of GDP, could also begin to rise as the domestic banks face liquidity pressures and the government is forced to intervene as well as it can, though it cannot afford bailouts like those in the United States, Europe and Russia. The country’s sixth largest bank, Prominvestbank — which holds 4 percent of the market share in Ukraine’s banking sector — was already bailed out by the government on Oct. 8 to the tune of $1 billion, and the Ukrainian economy’s overall weakness indicates that more domestic lenders could follow suit.

However, much as in Central Europe, it could be the foreign banks that create havoc for Ukraine’s economy. Foreign banks already own roughly 50 percent of the country’s banking system: Austria’s Raiffeisen owns Bank Aval, Italy’s UniCredit owns Ukrsotsbank and the French BNP Paribas owns UkrSibbank. These banks — both foreign and domestic — were particularly active in bringing about the Ukrainian explosion of mortgages and retail loans, most of which were made in foreign currencies (euro and Swiss francs) so as to take advantage of a lower interest rate.

Ukraine is right behind the troubled Hungary, Croatia and Romania in terms of the percentage of total loans made in foreign currencies (roughly 50 percent of all loans in Ukraine). As the hryvnia depreciates, consumers and businesses will be less able to service these foreign-currency-denominated loans. This will lead to a potential mountain of unserviceable debt that could collapse domestic banks and spread the contagion to the rest of emerging markets and potentially to foreign bank headquarters.

The International Monetary Fund (IMF) has offered Ukraine a $16.5 billion loan. However, Ukraine’s internal political chaos has suspended the country’s ability to meet the IMF’s conditions or even make a decision on the IMF’s terms.

Fundamentally WeakBeyond the current financial crisis, Ukraine’s economy is volatile at best — leaving little hope for the country to pull itself out of any difficulty. One problem is that each region in Ukraine is highly dependent on a specific industry for money; so when that industry fails, the entire region tends to fail. Furthermore, most of Ukraine’s lucrative business is based in the eastern half of the country, which typically gives that half (and Russia) a bit more political and economic power. Although Ukraine mainly depends on its metallurgical industry, it also gains much revenue from grain, military exports and energy transit. However, each of these sectors is suffering from deep problems that could not be easily fixed even if the country had the proper tools.

(click image to enlarge)MetalsUkraine is one of the world’s top 10 steel-producing and iron-ore-producing nations and is the third-largest exporter of steel. The metallurgical industry accounts for 40 percent of Ukraine’s exports, nearly 30 percent of its GDP and 12 percent of its tax revenues — and it employs more than half a million people.

However, the metallurgical industry is exceedingly inefficient and outdated. It is also highly dependent on expensive natural gas from its neighbor, Russia, making the cost of Ukrainian steel already 25 percent higher than its Russian and Chinese competitors. To make matters worse, demand and prices for many metals, especially steel, are collapsing globally. Prices for steel soared for the past year, prompting many steel-producing countries such as Brazil, India, Russia, China and Australia to overproduce, creating a global surplus. This leaves Ukraine horribly exposed since anyone who would have previously agreed to pay for the more-expensive Ukrainian steel now has several other options.

Ukraine’s Industry Ministry has officially declared the metallurgical sector to be in crisis, with 17 of the 36 steelmaking furnaces closed. Moreover, many of the metals heavyweights in Ukraine are foreign-owned — by firms such as ArcelorMittal and Rusal — and are already discussing massive layoffs. This will also greatly increase Ukraine’s account deficit. The bottom line is that Ukraine simply cannot compete on a global level in metallurgy, though much of its economy is dependent on it.

GrainUkraine saw an increase in revenues from an abundant grain harvest and exporting; in the third quarter of 2008, Ukraine’s exports outpaced imports. Grains account for approximately 6 percent of the country’s exports and brought in more than $2 billion the summer of 2008. The problem with grain is that the revenue it generates is cyclical, and thus Ukraine will not see any more cash from it until mid-2009. That, combined with severe credit constriction — which will stress farmers in the upcoming planting season — makes any dependency on the grain sector shaky.

Military ExportsUkraine also depends on military exports to bring in cash. During and after the collapse of the Soviet Union, military units (including nuclear forces) were moved from Ukraine back inside Russia proper, but Kiev retained and commanded a great deal of Soviet military hardware and production facilities. Since around the mid-1990s, Kiev has sold that used equipment to countries as diverse as China, Sierra Leone, Kenya and even the United States. Though Ukraine retains significant stocks of such equipment, those stocks continue aging and slipping further toward obsolescence, and there is a (rapidly approaching) limit to how far the Soviet military legacy can carry Ukraine. There are a few discrepancies in estimates of how much money military exports bring in for Kiev. The official estimate by the Ukrainian Defense Ministry is around $1 billion a year; however, there are many within the government who claim it generates three times that amount but some equipment is sold under the table to other parties (such as Georgia) that Kiev does not want to be formally connected with.

Energy TransitThe only other really substantial moneymaker for the country is energy transit. Eighty percent of Russia’s energy exports of oil and natural gas to Europe transit through Ukraine. Currently, Ukraine receives approximately $1.9 billion a year simply for transiting Russian and Central Asian natural gas to Europe, along with some compensation on its own domestic purchases — be that a small bartered amount in payment or discounted natural gas. Ukraine announced Nov. 5 that it is planning on raising the amount it transports in 2009 in hopes of raising its revenues. However, the energy game is tricky for Ukraine because it also has to import 90 percent of its own domestic supplies of natural gas — something that typically gets the government into a $2 billion debt to Moscow every quarter — and Russia is considering raising its prices to Ukraine in the new year.

November 19, 2008 | 1204 GMT SummaryWithin Ukraine there are several forces that, in theory, could steer the country in one direction or another. However, the political forces have been locked in a battle for control for the past four years. Meanwhile, Ukraine’s oligarchs and other forces with both economic and political clout are too distracted by the current global financial crisis to take action. Thus, Ukraine has been left with no ability to handle its own crisis or determine its own future.

AnalysisEditor’s Note: This is the second part of a series on Ukraine.

Ukraine’s government is simply far too shattered and chaotic to handle the country’s current financial and economic problems or make any of the reforms needed in its defunct financial, economic, military and energy sectors. Kiev has been a confused and chaotic mass of shifting coalitions and governments since the 2004 Orange Revolution, which was supposed to herald a new era in which Ukraine would be part of the West rather than a Russian satellite.

From the Orange Revolution through today, Ukraine’s political scene has been dominated by three main parties (though there are myriad smaller parties):

Our Ukraine: The vehemently pro-Western party under current Ukrainian President Viktor Yushchenko

Bloc Yulia Timoshenko: A coalition of parties under current Ukrainian Prime Minister Yulia Timoshenko that can flip to either the pro-Western or pro-Russian side; and

Party of Regions: The vehemently pro-Russian party led by former Ukrainian Prime Minister Viktor Yanukovich. Our Ukraine and Timoshenko’s bloc were the parties behind the Orange Revolution, though all three major parties have flip-flopped into different coalitions half a dozen times in the past four years. Most of the breaks and alliances among the three groups have not necessarily come about because of changes in ideology; rather, they are driven by the personalities and egos of Yushchenko, Timoshenko and Yanukovich. Typically, with each turnover in the government and coalitions, the laws and reforms passed by the former ruling group are either undone or ignored. This has seriously retarded any restructuring or improvement in almost any sector or institution in the country.

Furthermore, each political group generally controls a certain region of the country, so the parties look out for those industries, oligarchs and regional economics that pertain to their regions. This means that if a political party is booted from power, any restructuring or deals in place for its favorite region, industry or business can be overturned. The result is a business environment as chaotic and confusing as the political environment.

Ukraine is still suffering from political chaos. There has been one small internal shift: So many political figures outside of the big three personalities are so worn down from the constant bickering that they have started a wave of new political parties and groups. Parliamentary elections could be held in December of January, with a presidential election in late 2009 or early 2010. And with 72 percent of Ukrainians saying they are tired of the political infighting, these new smaller parties could end up changing the political landscape and making Ukraine’s political future even more unpredictable.

The Oligarchs

As in neighboring Russia, Ukraine also has the political and economic force of the oligarchs — those who swooped in after the Soviet era to snatch up certain enterprises and businesses, making themselves incredibly wealthy and powerful very quickly. The oligarchs are very politically active. Some started out in politics and then seized wealth and position to become oligarchs; others began by securing wealth and position to use as leverage in politics. Just as in Russia, Ukraine’s oligarchs either back certain political forces — paying for campaigns and receiving kickbacks once their chosen players are in power (such as the oligarchs backing Yushchenko and Yanukovich) — or they establish their own political parties as a means to influence distribution of resources and advantageous business deals (as with Timoshenko). This has helped fuel the constant government chaos and sustained a level of distrust in Ukrainian businesses and those who run them.

But at the moment, the oligarchs are unable to shape the political or economic landscape in Ukraine because they are being crushed by the economic crisis. According to some records, Ukrainian oligarchs’ assets have lost some 90 percent of their value in the past few months. For example, Viktor Pinchuk (a Timoshenko backer), who controls Ukraine’s leading steel company Interpipe, has lost $2 billion. Sergei Taruta (a Yanukovich backer), who controls another metallurgical giant ISD, has lost $4.8 billion.

While Ukraine’s oligarchs are scrambling to keep their businesses and wealth intact, they are too preoccupied to be as politically active as usual. With two critical elections looming, there could be a shift in that the oligarchs will not be able to dole out cash as easily as in the past. For example, Timoshenko has already heard from one of her financial backers — Konstantin Zhevago, who owns Financial and Credit Group and iron producer Poltavsky — that he will not be dishing out his usual funding because he recently lost most of his wealth. The crisis among the oligarchs has led both Timoshenko and Yanukovich to try to postpone elections, knowing they do not heave enough cash to run full campaigns.

Rinat Akhmetov

The one Ukrainian oligarch who is not absent from the political scene is the wealthiest in the country — Rinat Akhmetov, who owns assets in energy, steel, coal, banking, hotels, telecommunications, media and soccer. Most Ukrainian oligarchs are worth only a fraction of what Akhmetov is worth. Much of his wealth was not in the hard-hit equity markets, and so he has only lost a reported $7 billion of his $36 billion in the economic slowdowns; thus, he still has quite a bit of influence to wield in politics and economics.

Akhmetov is looking to take advantage of others’ economic misfortune and wants to expand his reach over more assets (especially in coal and electricity) not only in Ukraine, but also in Russia, Poland, Romania and Hungary. He has long been the puppet master behind the Party of Regions and Yanukovich; Stratfor has learned from sources that he also holds a great deal of leverage over Yushchenko and Timoshenko. Long kept in the shadows, Akhmetov is considering running for the presidency, knowing he has the financial capabilities, political backing from his leash holder (Russia) and enough clout against the big three political leaders to possibly really shake things up.

Other Forces

The only other forces in Ukraine that can affect the political or economic landscapes are the military, intelligence services and organized crime. As stated earlier, Ukraine’s military — much like its stockpile of Soviet weaponry — is seriously deteriorating without the political or economic backing needed to push for and coordinate modernization and reforms.

Ukraine’s intelligence and security apparatus — mainly the Security Service of Ukraine — is currently tangled in an identity crisis stemming from its break with its former master, the Soviet KGB, and the constant restructuring and leadership changes. Ukraine’s intelligence and security services consist of seven agencies and institutes that are responsible for identifying threats to Ukraine both at home and abroad, collecting intelligence and analyzing data. All agency heads are appointed by and report to the president, but the parliament must approve the appointments — which means the intelligence and security services are another casualty of the political chaos as the president and prime minister fight for control.

Organized crime is another major political and economic force in Ukraine, having proliferated since the country gained independence from the Soviet Union in 1991. Ukrainian organized crime started off as a function of physical security for the oligarchs who controlled Ukraine’s resources and backed favored politicians, but expanded because the country’s weak central government was unable to effectively police criminals. Organized crime became a pillar of the state through the political-criminal nexus in which politicians, businessmen and criminals provided each other with services and favors. It has branched out considerably, with Ukrainian organized crime groups forming partnerships or acting alone in countries throughout Eastern and Central Europe — and because Ukraine remains essentially a weak state dependent on outside patronage, foreign organized criminal elements have found a market there for illicit goods and human trafficking. But organized crime, just like other businesses, is suffering during the economic and financial crisis as criminal groups lose funds in foreign banks and customers have less cash to spend on services and goods.

Part 3: Outside InterventionStratfor Today » November 20, 2008 | 1201 GMT SummaryBecause Ukraine is vital to Russia’s defense and survival as any kind of world power, it has become the cornerstone of the geopolitical battle between Russia and the West. Russia has many levers it could use to influence the course of Ukraine’s future, though the West is not without its tools. The eventual outcome of the battle for Ukraine is uncertain.

AnalysisEditor’s Note: This is the third part of a series on Ukraine.

Since Ukraine is essentially too internally shattered to make sweeping changes or reforms, its future is at the whim of foreign powers. Because of this — and because of Ukraine’s geographic location — the country is now the chief arena for the struggle between Russia and the West.

Related LinksCountries in Crisis Part 1: Instability in a Crucial Country Part 2: Domestic Forces and Capabilities The CornerstoneFollowing the collapse of the Soviet Union, the West (particularly under the guises of the European Union and NATO) has pushed eastward, making its way toward Russia’s doorstep. As the West tries to continue its advance and as Russia tries to stave it off, Ukraine has become paramount to both sides — not just as a potentially lucrative territory, but because Ukraine is the key to Russia’s defense and survival as any sort of power.

(click image to enlarge)Although Ukraine hosts the largest Russian community in the world outside of Russia, the battle for Ukraine is about far more than ethnic kin. Even before the Soviet era, Ukraine was integrated into Russia’s industrial and agricultural heartland, and eastern Ukraine remains integral to the Russian heartland to this day. Furthermore, Ukraine is the transit point for Russian natural gas to Europe and a connecting point for nearly all meaningful infrastructures running between Russia and the West — whether pipeline, road, power or rail.

Without Ukraine, Russia could not project political or military power into the Northern Caucasus, the Black Sea or Eastern Europe, and Russia would be nearly entirely cut off from the rest of Europe. Ukraine also goes deep into former Soviet territory, with borders a mere 300 miles from either Volgograd or Moscow, and the Ukrainian port of Sevastopol on the Black Sea has long been the Russian military’s only deep, warm-water port.

To put it simply, as long as Ukraine is in its orbit, Russia can maintain strategic coherence and continue on its path of resurging in an attempt to resume its superpower status. Without Ukraine, Russia would face a much smaller set of possibilities.

This is why the 2004 Orange Revolution that brought in Ukraine’s first pro-Western government was Russia’s deepest nightmare. Russia knows that the Orange Revolution was a U.S.-backed project, supported by U.S. allies such as Poland. Since that color revolution, Moscow has been content with simply destabilizing Ukraine in order to ensure it does not fully fall into the West’s sphere.

Russia’s LeversRussia has a slew of levers inside Ukraine to keep the country unstable. It also has quite a few tools it could use to either pull the country back into Moscow’s fold or break the country apart.

Politics: Russia is the very public sponsor of Viktor Yanukovich and his Party of Regions; though in the past three months, Moscow has also started granting its favor to Yulia Timoshenko — breaking the Orange Coalition and isolating President Viktor Yushchenko and his party. The topic of how to respond to a strengthening Russia has been a constant point of contention in Ukraine’s different coalitions and governments.

Energy: Since Russia supplies 80 percent of Ukraine’s natural gas, energy is one of Moscow’s favorite levers to use against Kiev. Moscow has proven in the past that it is not afraid of turning off the heat at the height of winter in Ukraine to not only hurt the country but also to push Kiev into the heart of a firestorm as European countries’ supplies get cut off when Russia cuts supplies to Ukraine. The price Russia charges Ukraine for natural gas is also constantly being renegotiated, with Kiev racking up billions of dollars in debt to Moscow every few months.

Economics: Russia controls a large portion of Ukraine’s metals industry, owning factories across the eastern part of the country, where most of Ukraine’s wealth is held. Russia also controls much of Ukraine’s ports in the south.

Oligarchs: Quite a few of Ukraine’s oligarchs pledge allegiance to Russia because of relationships from the Soviet era, because of assets held in Russia or because Moscow bought or supported certain oligarchs during their rise. Rinat Akhmetov is the most notable pro-Russian oligarch; not only does he do the Kremlin’s bidding inside Ukraine, but he is also rumored to have recently helped the Kremlin during Russia’s financial crisis. Moscow controls many other notable Ukrainian oligarchs, such as Viktor Pinchuk, Igor Kolomoisky, Sergei Taruta and Dmitri Firtash. This has allowed the Kremlin to shape much in these oligarchs’ business ventures and have a say in how these oligarchs support certain politicians.

Ships from Russia’s Black Sea Fleet during the celebration of the fleet’s 225th anniversaryMilitary: Russia’s Black Sea Fleet is headquartered and based in Ukraine’s Crimea region, in Sevastopol. Compared to Kiev’s small fleet, Russian naval power in the Black Sea is overwhelming. Russia’s Black Sea Fleet also contributes to the majority of the Crimea region’s economy. Though imposing a military reality on Ukraine would be another thing entirely from imposing a military reality on South Ossetia and Georgia, there is little doubt that Russia — and the ethnic Russian majority in the Crimea — is committed to retaining the decisive hand in the fate of the Crimea, even if the Russian Fleet withdraws in 2017, when its lease expires.

Intelligence: Ukraine’s intelligence services were essentially born from Russia’s heavy KGB presence in the country before the collapse of the Soviet Union. The Security Service of Ukraine originated in Moscow’s KGB presence in Ukraine, and the Foreign Intelligence Service of Ukraine sprung forth from Russia’s SVR foreign intelligence agency. Many of the senior officials in both agencies were actually KGB trained and worked for them during the early days of their careers. Russia’s current spy agency, the Federal Security Service (a descendant of the KGB), has a heavy presence within Ukraine’s intelligence agencies. This gives the Russians a big opening they can use to serve their own interests in Ukraine.

Organized crime: Russian organized crime is the parent of Ukrainian organized crime and is still deeply entrenched in the current system (even among the oligarchs). Russia has been especially successful in setting up shop in the Ukraine involving shady natural gas deals, the arms trade, the drug trade and other illicit business arrangements. Population: Ukraine is dramatically split between a population that identifies with Russia and a population that identifies with the West. It has a complex and multifaceted demography: A large Russian minority comprises 17.3 percent of the total population, more than 30 percent of all Ukrainians speak Russian as their native language and more than half of the country belongs to the Ukrainian Orthodox Church under the Moscow Patriarch. Geographically speaking, Ukrainians living east of the Dnieper River tend to identify more with Russia than with the West, and those in Crimea consider themselves much more Russian than Ukrainian. This divide is something Russia can use not only to keep the country in chaos, but to split the country in half should the need arise.

The West’s Levers and Concerns

The West, on the other hand, is split over what exactly to do with Ukraine. In 2004, during the Orange Revolution, it was the United States’ time to push up against Russia; but other Western heavyweights such as Germany have never really liked or trusted any government in Kiev. Berlin would love to see a pro-Western government in Kiev to work with, but the Germans know that meddling in Ukraine costs them something, unlike the Americans. This was seen in 2006, when Russia cut off natural gas supplies to Ukraine, which led to the lights going out in quite a few European countries as well. So the Europeans see the upheaval of Ukraine as yet another mess the Americans have gotten them into.

Since the Orange Revolution, the West has used two main levers — cash and protection — to try to keep Kiev on a pro-Western path. It has thrown cash at Ukraine, but there are two problems with this move. First, whoever has been in charge in Kiev has squandered and mismanaged any cash given to Ukraine rather than working to alleviate the economic, financial, institutional and systematic problems the country is facing. For example, the West is offering Ukraine an International Monetary Fund (IMF) loan of $16.5 billion with only a few strings — banking reform and an end to government squabbling — attached, but Kiev cannot manage these changes, and now the IMF is considering withdrawing its offer. Second, as the West faces its own financial crisis, it is not in any position currently to offer Kiev any more help.

The West’s other move — again championed by Washington — is to pull Ukraine into NATO. Ukraine is ill-qualified as a potential member of the Atlantic alliance, but the move would permanently break Russia’s hold over Ukraine.

Years of concerted, focused and well-funded military reform could move Kiev meaningfully toward eligibility, but there appears to be no firm consensus — especially with Germany and France against it — on pushing for Ukrainian admittance into the membership action plan. Also, NATO’s members have neither troops available to be stationed in the country nor the defense dollars to support such an expensive modernization and reform program.

The battle for the soul of Ukraine is on. The country is shattered internally in nearly every possible way: politically, financially, institutionally, economically, militarily and socially. The global financial crisis is simply showing the problems that have long existed in the country. In the near future, there is no conceivable or apparent way for any force within the country to stabilize it and begin the reforms needed. It will take an outside power to step in — which leads to the larger tussle between the West and Russia over control of one of the most geopolitically critical regions between the two. Russia has far more tools to use to keep Ukraine under its control, but the West has laid a lot of groundwork in order to undermine Moscow, leaving the future of Ukraine completely uncertain.

PS: Russian President Dmitri Medvedev told energy company Gazprom to collect Ukraine’s $2.4 billion natural gas debt “either voluntarily or compulsory in line with current laws and within the framework of bilateral relations,” Interfax reported Nov. 20.

At the time of this writing, the natural gas crisis in Europe is entering its 13th day.

While the topic has only penetrated the Western mind as an issue in recent years, Russia and Ukraine have been spatting about the details of natural gas deliveries, volumes, prices and transit terms since the Soviet breakup in 1992. In the end, a deal is always struck, because Russia needs the hard currency that exports to Europe (via Ukraine) bring, and Ukraine needs natural gas to fuel its economy. But in recent years, two things have changed.

First, Ukraine’s Orange Revolution of 2004 brought to power a government hostile to Russian goals. Ukrainian President Viktor Yushchenko would like to see his country integrated into the European Union and NATO; for Russia, such an evolution would be the kiss of death.

Ukraine is home to most of the infrastructure that links Russia to Europe, including everything from pipelines to roads and railways to power lines. The Ukrainian and Russian heartlands are deeply intertwined; the two states’ industrial and agricultural belts fold into each other almost seamlessly. Eastern Ukraine is home to the largest concentration of ethnic Russians and Russian speakers anywhere in the world outside Russia. The home port of Russia’s Black Sea Fleet is at Sevastopol on Ukraine’s Crimean Peninsula, a reminder that the Soviet Union’s port options were awful — and that Russia’s remaining port options are even more so.

Ukraine hems in the south of European Russia so thoroughly that any hostile power controlling Kiev could easily threaten a variety of core Russian interests, including Moscow itself. Ukraine also pushes far enough east that a hostile Kiev would sever most existing infrastructure connections to the Caucasus. Simply put, a Ukraine outside the Russian sphere of influence transforms Russia into a purely defensive power, one with little hope of resisting pressure from anywhere. But a Russified Ukraine makes it possible for Russia to project power outward, and to become a major regional — and potentially global — player.

Related LinksPart 1: Instability in a Crucial Country Part 2: Domestic Forces and Capabilities Part 3: Outside Intervention The Russo-Georgian War and the Balance of Power Russia and Rotating the U.S. Focus Europe: Feeling the Cold Blast of Another Russo-Ukrainian Dispute Global Market Brief: Europe’s Long-Term Energy Proposal Related Special Topic PageRussian Energy and Foreign Policy The second change in recent years is that Russia now has an economic buffer, meaning it can tolerate a temporary loss in natural gas income. Since Vladimir Putin first came to power as prime minister in 1999, every government under his command has run a hefty surplus. By mid-2008, Russian officials were regularly boasting of their $750 billion in excess funds, and of how Moscow inevitably would soon become a global financial hub. Not surprisingly, the 2008-2009 recession has deflated this optimism to some extent. The contents of Moscow’s piggy bank already have dropped by approximately $200 billion. Efforts to insulate Russian firms and protect the ruble have taken their financial toll, Russia’s 2009 budget is firmly in deficit, and all talk of a Russian New York is on ice.

But Russia’s financial troubles pale in comparison to its neighbors’ problems — not in severity, but in impact. Russia is not a developed country, or even one that, like the states of Central Europe, is seriously trying to develop. A capital shortage simply does not damage Russia as it does, say, Slovakia. And while Russia has not yet returned to central planning, rising government control over all sources of capital means the Russia of today has far more in common economically with the Soviet Union than with even the Russia of the 1990s, much less the free-market West. In relative terms, the recession actually has increased relative Russian economic power — and that says nothing about other tools of Russian power. Moscow’s energy, political and military levers are as powerful now as they were during the August 2008 war with Georgia.

This is a very long-winded way of saying that before 2004, the Russian-Ukrainian natural gas spat was simply part of business as usual. But now, Russia feels that its life is on the line, and that it has the financial room to maneuver to push hard — and so, the annual ritual of natural gas renegotiations has become a key Russian tool in bringing Kiev to heel.

And a powerful tool it is. Fully two-thirds of Ukraine’s natural gas demand is sourced from Russia, and the income from Russian natural gas transiting to Europe forms the backbone of the Ukrainian budget. Ukraine is a bit of an economic basket case in the best of times, but the global recession has essentially shut down the country’s steel industry, Ukraine’s largest sector. Russian allies in Ukraine, which for the time being include Yushchenko’s one-time Orange ally Yulia Timoshenko, have done a thorough job of ensuring that the blame for the mass power cuts falls to Yushchenko. Facing enervated income, an economy in the doldrums and a hostile Russia, along with all blame being directed at him, Yushchenko’s days appear to be numbered. The most recent poll taken to gauge public sentiment ahead of presidential elections, which are anticipated later this year, put Yushchenko’s support level below the survey’s margin of error.

Even if Yushchenko’s future were bright, Russia has no problem maintaining or even upping the pressure. The Kremlin would much rather see Ukraine destroyed than see it as a member of the Western clubs, and Moscow is willing to inflict a great deal of collateral damage on a variety of players to preserve what it sees as an interest central to Russian survival.

Europe has been prominent among these casualties. As a whole, Europe imports one-quarter of the natural gas it uses from Russia, and approximately 80 percent of that transits Ukraine. All of those deliveries now have been suspended, resulting in cutoffs of various degrees to France, Turkey, Poland, Germany, Italy, Hungary, Romania, Austria, the Czech Republic, Greece, Croatia, Macedonia, Bosnia, Serbia and Bulgaria — in rough order of increasing severity. Reports of both mass power outages and mass heating failures have been noted in the countries at the bottom half of this list.

A variety of diversification programs have put Europe well on its way to removing its need for Russian natural gas entirely, but these programs are still years from completion. Until then, not much can be done for states that use natural gas for a substantial portion of their energy needs.

Unlike coal, nuclear energy or oil, natural gas can be easily shipped only via pipeline to previously designated points of use. This means the decision to link to a supplier lasts for decades and is not easily adjusted should something go wrong. Importing natural gas in liquid form requires significant skill in cryogenics as well as specialized facilities that take a couple of years to build (not to mention a solid port). Alternate pipe supply networks, much less power facilities that use different fuels, are still more expensive and require even more time. All European countries can do in the immediate term is literally rely upon the kindness of strangers until the imbroglio is past or a particularly creative solution comes to mind. (Poland has offered several states some of its share of Russian natural gas that comes to it via a Belarusian line.) Some Central European states are taking the unorthodox step of recommissioning mothballed nuclear power plants.

Because Russia’s goal in all this is to crack Kiev, there is not much any European country can do. But one nation, Germany, is certainly trying. Of the major European states, Germany is the most dependent upon Russian resources in general, and energy in particular.

German Chancellor Angela Merkel and Putin spent three nights this past week on the phone with each other discussing the topic, and the pair has a two-day summit set for later this week. The Germans have three primary reasons for cozying up to the Russians at a time when it seems they should be as angry as anyone else in Europe.

First, because most of the natural gas Germany gets from Russia passes not through Ukraine, but through Belarus — and because the Russians have not interrupted these secondary flows — the Germans desperately want to avoid rocking the boat and politicizing the dispute any more than necessary. The Germans need to engage the Russians in discussion, but unlike most other players, they can afford not to be accusatory, because they have not been too deeply affected so far. (Like all the other Europeans, the Germans are working feverishly to diversify their energy supplies away from Russia, but while Berlin can keep the lights on, it doesn’t want to ruffle any more feathers than it needs to.)

Second, as any leader of Germany would, Merkel recognizes that if current Russian-Western tensions devolve into a more direct confrontation, the struggle would be fought disproportionately with German resources — and perhaps even on German soil. Germany is the closest major power to Russia and would therefore be the focus of any major action, Russian or Western, offensive or defensive. France, the United Kingdom and the United States enjoy the buffer of distance — and in the case of the last two, a water buffer to boot.

German national interest, therefore, is not to find a way to fight the Russians, but to find a way to live with them. Germany traditionally has been Russia’s largest trading partner. Every time the two have clashed, it has been ugly, to say the least. In the German mind, if Ukraine (or perhaps even adjusting the attitude of Poland) is what is necessary to make the Russians feel secure, so be it.

Third, Germany has a European angle to think about. To put it bluntly, Merkel is always on the lookout for any means of easing Germany back into the international community with a foreign policy somewhat more sophisticated than the “I’m sorry” that has reigned since the end of World War II. After the war, France successfully hijacked German submission and used German economic strength to achieve French political desires. Since the Cold War’s end, Germany has slowly wormed its way out of that policy straitjacket, and the natural gas crisis raises an interesting possibility. If Merkel’s discussions with Putin result in restored natural gas flows, then not only will Russia see Germany as a partner, but Germany might win goodwill from European states that no longer have to endure a winter without heat.

Still, it will be a tough sell: the European states between Germany and Russia have always lived in dread that one power or the other — or, God forbid, both — will take them over. But Germany is clearly at the center of Europe, and all of the states affected by the natural gas crisis count Germany as their largest trading partner. If Merkel can muster sufficient political muscle to complement Germany’s economic muscle, the resulting image of strength and capability would go a long way toward cementing Berlin’s re-emergence.

SummaryThe Russian Finance Ministry announced Feb. 9 that its Ukrainian counterpart requested a $5 billion loan from Moscow to cover Kiev’s budget deficit. Coupled with the International Monetary Fund’s wariness of disbursing a second tranche ($1.9 billion) of a $16.5 billion loan agreed upon in November 2008, this move indicates the seriousness of Ukraine’s financial state. It also highlights Ukraine’s more fundamental economic problems, showing that Kiev ultimately will fall into the orbit of whichever country can come to its aid financially.

AnalysisUkraine made an official request to Russia on Feb. 9 for a $5 billion loan to make up for a decrease in budget revenues, the Russian Finance Ministry announced. Ukrainian Prime Minister Yulia Timoshenko has also asked the leaders of the world’s richest countries for emergency loans, citing the difficulties her country faces as a result of the global financial crisis.

Kiev began its frantic search for loans from “powerful and financially stable countries” after a visit by an International Monetary Fund (IMF) delegation the week of Feb. 1 that did not go well at all. The IMF typically works by doling out loans to troubled countries in tranches, usually attached with strict conditions designed for macroeconomic stabilization. Ukraine received its first such tranche of $4.5 billion (out of a total loan of $16.5 billion) in November. But Kiev has failed to live up to the loan’s requirements, which include a deficit-free budget for 2009 — the budget has a 3 percent deficit — and a curtailing of social spending. The latter is an especially dangerous task politically, with Ukrainian unemployment figures soaring above the 1 million mark (out of a population of 46 million) and presidential elections slated for early 2010. Because of Ukraine’s shortcomings, the IMF delegation made no promises that a second tranche would be coming in the near future.

But Ukraine as a country is fundamentally broken, and its economy — which was far from stable even before the global economic crisis — will not be fixed easily with loans from the IMF, Russia or the West. The Ukrainian government is essentially at odds with itself, split between the pro-Russian and pro-Western movements. The country’s political and economic institutions need more than small tweaks, and until they are radically reformed — which would be tremendously difficult to pull off socially — Kiev cannot do without outside assistance. And whoever provides this assistance will hold the most influence over Ukraine.

This reality is only intensified by the financial crisis. Kiev depends heavily on manufacturing and industry for its government revenues, and as of December 2008, industrial production had dropped more than 26 percent year on year. Ukraine’s currency has fallen dramatically since last summer, losing nearly a third of its value, and the country’s gross domestic product for 2009 is expected to contract 5 percent.

Financial assistance does not necessarily need to come from the Russians; Kiev simply needs to find whoever will help its economy survive. Previously, Russia’s influence in Ukraine was underwritten by natural gas prices that were well below what the Europeans were charged. However, Russia raised those prices significantly, causing a monthlong standoff that affected much of Europe and created more economic problems for Kiev. Though Kiev paid its natural gas bill for January, a representative of Ukrainian energy giant Naftogaz said the renegotiated prices will cause Ukraine to go bankrupt. Currently, the Europeans are in no financial position to bail out Ukraine, so Kiev is calling on Moscow to alleviate Ukraine’s financial pains.

To be able to proceed, with the IMF’s assistance, in trying to tackle its myriad economic problems, Ukraine must first take care of its budget deficit — hence the request to Russia for a $5 billion loan, which would roughly cover the deficit. Any Russian assistance, however, will come with strings attached. While the natural gas situation remains shaky and tense, a $5 billion loan would effectively draw Kiev further into Russia’s orbit. And with political infighting and instability the norm in Ukraine, Russia will be sure to take advantage of Kiev’s financial weaknesses in any way that it can. This essentially means that Ukraine will be divorced from its Western leanings and will move firmly into Russia’s sphere of influence, both economically and politically.

SummaryUkraine’s next presidential election is scheduled for Jan. 17. All of the leading candidates are pro-Russian. This means that the last vestiges of pro-Western government brought on by the 2004 Orange Revolution will be swept away and Russia’s ongoing consolidation of power will become evident in Kiev.

Editor’s Note: This is the first part of a three-part series on Ukraine’s upcoming presidential election.

AnalysisRelated LinkUkraine: More than a Religious SchismSTRATFOR’s 2010 Annual Forecast said, “For Russia, 2010 will be a year of consolidation — the culmination of years of careful efforts.” Moscow will purge Western influence from several countries in its near abroad while laying the foundation of a political union enveloping most of the former Soviet Union. Although that union will not be completed in 2010, according to our forecast, “by year’s end it will be obvious that the former Soviet Union is Russia’s sphere of influence and that any effort to change that must be monumental if it is to succeed.”

Ukraine is one country where Russia’s consolidation will be obvious, mainly because the most important part of reversing the 2004 pro-Western Orange Revolution will occur: the return of a pro-Russian president in Kiev. Ukraine’s presidential election is slated for Jan. 17, and all the top candidates in the race are pro-Russian in some way.

Russia considers Ukraine to be vital to its national interests; indeed, of all the countries where Moscow intends to tighten its grip in 2010, Ukraine is the most important. Because of its value to Moscow, Ukraine has been caught for years in a tug-of-war between Russia and the West. Since the Orange Revolution, Russia has used social, media, energy, economic and military levers — not to mention Federal Security Service assets — to break the Orange Coalition’s hold on Ukraine and the coherence of the coalition itself. Russia even managed to get a pro-Russian prime minister placed in Kiev for more than a year. However, the presidency remained in the hands of pro-Western Viktor Yushchenko. And in Ukraine, it is the president who controls the military (including the military-industrial sector and its exports), the secret services (which, while littered with Russian influence, are still controlled by a pro-Western leader) and Ukraine’s foreign policy.

Typically, STRATFOR does not focus on personalities because long-term trends in geopolitics act as constraints on human agency, limiting the value of individual-level analysis in forecasting. However, the Ukrainian election is a critical part of Russia’s resurgence, and STRATFOR will shed light on the colorful and complicated world of Ukrainian politics and offer clarity on the personalities that will lead Ukraine back into the Russian fold — and explain how Moscow has ensured their loyalty.

The candidates STRATFOR will examine are not all front-runners, necessarily, but they are the most important candidates in the race. Yushchenko is running for re-election but, according to polls from the past year, has support from only 3.8 percent of Ukrainian voters, which is little more than the margin of error. Former Ukrainian Prime Minister Viktor Yanukovich — who won Ukraine’s initial 2004 presidential election but was swept from power in the re-vote sparked by the Orange Revolution — has always been staunchly pro-Russian and stands a good chance of victory on Jan. 17. Current Ukrainian Prime Minister Yulia Timoshenko is also in the running. She was Yushchenko’s partner in the Orange Revolution, but Russia’s growing influence in Ukraine persuaded her to make a deal with Moscow, and she is now running on a relatively pro-Russian platform. The last candidate we will examine is Arseny Yatsenyuk, a young politician once thought to be free of both pro-Western and pro-Russian ties. However, STRATFOR sources have said that Yatsenyuk is not exactly what he seems, and that much more powerful forces — with Russian ties — are behind this Ukrainian wild card.

SummaryOn Jan. 17, Ukraine is scheduled to hold a presidential election that will sweep the last remnant of the pro-Western Orange Revolution — Ukrainian President Viktor Yushchenko — from power in Kiev. Yushchenko’s presidency has been marked by pro-Western moves on many levels, including attempts to join the European Union and NATO. However, the next government in Kiev — pro-Russian though it may be — could still have a place for Yushchenko.

Editor’s Note: This is the second part of a three-part series on Ukraine’s upcoming presidential election.

AnalysisUkrainian President Viktor Yushchenko is the last remnant of the pro-Western Orange Revolution. Now that his popularity has plummeted and his coalition partner, Prime Minister Yulia Timoshenko, has turned pro-Russian, he is set to be swept aside by Ukraine’s Jan. 17 presidential election.

Yushchenko led the Orange Revolution, and his presidency kept Russia from completely enveloping Ukraine. Although the upcoming presidential election will deliver Ukraine into Russia’s hands, Yushchenko might not be ejected from Kiev altogether.

Yushchenko entered the government in 1999 when he was nominated as prime minister by then-President Leonid Kuchma after a round of infighting over the premiership. As prime minister, Yushchenko — a former central bank chief — helped Ukraine economically and helped keep relative internal stability for two years. Yet even while he served in the government, Yushchenko partnered with Timoshenko — his deputy prime minister — and started a movement against Kuchma. When a vote of no confidence ended Yushchenko’s premiership in 2001, he and his coalition partners accelerated their anti-Kuchma movement, aiming to make Yushchenko president in 2004 with Timoshenko as his prime minister. In the 2004 election, Yushchenko faced another of Kuchma’s prime ministers, Viktor Yanukovich.

Yushchenko became the West’s great hope during the 2004 presidential campaign, as he vowed to integrate Ukraine with the West and seek membership in NATO and the European Union. Although the West fully supported Yushchenko, other parties were not as thrilled with his candidacy. During the campaign, he was poisoned with dioxin, a carcinogenic substance whose outward effects include facial disfigurement. Yushchenko’s camp charged that Russian security services were behind the poisoning.

When the presidential election was held, Yanukovich was declared the winner. However, voter fraud reportedly was rampant, and mass protests erupted across the country in what would become known as the Orange Revolution. Ukraine’s top court nullified the results of the first election, and when a second election was held, Yushchenko emerged victorious.

Yushchenko has acted against Russia on many levels during his presidency — from calling the Great Famine of the 1930s an act of genocide engineered by Josef Stalin to threatening to oust the Russian navy from Crimea and even trying to break the Ukrainian Orthodox Church and Russian Orthodox Church apart. He also tried to fulfill his promises that Ukraine would join NATO and the European Union (but these ideas proved too bold for some Western states, particularly Germany, since accepting Ukraine into either organization would enrage Russia). Most importantly, Yushchenko and his Orange Revolution were able to keep Ukraine from falling completely into Russia’s hands for at least five years. Yushchenko used the president’s control over foreign policy and Ukraine’s secret service and military to stave off Russia’s attempts to assert control over the country.

But all was not well in Kiev during Yushchenko’s presidency. His coalition with Timoshenko collapsed barely nine months after Timoshenko was named prime minister. Furthermore, Yushchenko was feeling the pressure of being a pro-Western leader in a country where much of the population remained pro-Russian or at least ambivalent enough that mere promises of pro-Western reform would not sway their vote. Yushchenko tried to find a balance in his government by naming Yanukovich prime minister in 2006, but this led to a series of shifting coalitions and overall instability in Kiev. It also stripped Yushchenko of much of his credibility as a strong pro-Western leader. His popularity has been in decline ever since.

Even though his polling numbers are currently at 3.8 percent, which places him behind five other candidates at the time of this writing, Yushchenko is trying for re-election. Unless he cancels the election — which would cause a massive uprising — this is the end of his presidency and of the Orange Revolution.

However, it might not be the end of his work inside the government. STRATFOR sources in Kiev have said that Yushchenko, Yanukovich and Russian officials are in talks that could lead Yushchenko to a relatively powerless premiership in Ukraine — a move to block Timoshenko and appease the Western-leaning parts of the country. There are regions in Western Ukraine that feel no allegiance to Russia. The Orange Revolution was strongest in the area around Lviv, a part of Ukraine that feels much more oriented toward neighboring Poland and the West. This region could very well become restive with the reversal of the Orange Revolution. A pro-Russian president, therefore, might have to include Yushchenko in the government to prevent fissures within the country. Though such a decision could create the same kind of political drama Kiev has seen in the past few years, Moscow will want to ensure that if such political chaos does occur Yushchenko will know his — and Ukraine’s — place under Russia.

Ukrainians go to the polls Feb. 7 to choose their next president. The last time they did this, in November 2004, the result was the prolonged international incident that became known as the Orange Revolution. That event saw Ukraine cleaved off from the Russian sphere of influence, triggering a chain of events that rekindled the Russian-Western Cold War. Next week’s runoff election seals the Orange Revolution’s reversal. Russia owns the first candidate, Viktor Yanukovich, outright and has a workable agreement with the other, Yulia Timoshenko. The next few months will therefore see the de facto folding of Ukraine back into the Russian sphere of influence; discussion in Ukraine now consists of debate over the speed and depth of that reintegration.

The Centrality of UkraineRussia has been working to arrest its slide for several years. Next week’s election in Ukraine marks not so much the end of the post-Cold War period of Russian retreat as the beginning of a new era of Russian aggressiveness. To understand why, one must first absorb the Russian view of Ukraine.

Related Special Topic PageThe Russian Resurgence Since the break-up of the Soviet Union, most of the former Soviet republics and satellites found themselves cast adrift, not part of the Russian orbit and not really part of any other grouping. Moscow still held links to all of them, but it exercised few of its levers of control over them during Russia’s internal meltdown during the 1990s. During that period, a number of these states — Estonia, Latvia, Lithuania, Poland, Hungary, Romania, Bulgaria and the former Czechoslovakia to be exact — managed to spin themselves out of the Russian orbit and attach themselves to the European Union and NATO. Others — Azerbaijan, Georgia, Moldova, Uzbekistan, Kyrgyzstan and Ukraine — attempted to follow the path Westward, but have not succeeded at this point. Of these six, Ukraine is by far the most critical. It is not simply the most populous of Russia’s former possessions or the birthplace of the Russian ethnicity, it is the most important province of the former Russian Empire and holds the key to the future of Eurasia.

First, the incidental reasons. Ukraine is the Russian Empire’s breadbasket. It is also the location of nearly all of Russia’s infrastructure links not only to Europe, but also to the Caucasus, making it critical for both trade and internal coherence; it is central to the existence of a state as multiethnic and chronically poor as Russia. The Ukrainian port of Sevastopol is home to Russia’s Black Sea fleet, and Ukrainian ports are the only well-developed warm-water ports Russia has ever had. Belarus’ only waterborne exports traverse the Dnieper River, which empties into the Black Sea via Ukraine. Therefore, as goes Ukraine, so goes Belarus. Not only is Ukraine home to some 15 million ethnic Russians — the largest concentration of Russians outside Russia proper — they reside in a zone geographically identical and contiguous to Russia itself. That zone is also the Ukrainian agricultural and industrial heartland, which again is integrated tightly into the Russian core.

These are all important factors for Moscow, but ultimately they pale before the only rationale that really matters: Ukraine is the only former Russian imperial territory that is both useful and has a natural barrier protecting it. Belarus is on the Northern European Plain, aka the invasion highway of Europe. The Baltics are all easily accessible by sea. The Caucasian states of Armenia, Azerbaijan and Georgia are on the wrong side of the Caucasus Mountains (and Russia’s northern Caucasus republics — remember Chechnya? — aren’t exactly the cream of the crop of Russian possessions). It is true that Central Asia is anchored in mountains to the south, but the region is so large and boasts so few Slavs that it cannot be controlled reliably or cheaply. And Siberia is too huge to be useful.

Without Ukraine, Russia is a desperately defensive power, lacking any natural defenses aside from sheer distance. Moscow and Volgograd, two of Russia’s critically strategic cities, are within 300 miles of Ukraine’s eastern border. Russia lacks any natural internal transport options — its rivers neither interconnect nor flow anywhere useful, and are frozen much of the year — so it must preposition defensive forces everywhere, a burden that has been beyond Russia’s capacity to sustain even in the best of times. The (quite realistic) Russian fear is that without Ukraine, the Europeans will pressure Russia along its entire western periphery, the Islamic world will pressure Russia along its entire southern periphery, the Chinese will pressure Russia along its southeastern periphery, and the Americans will pressure Russia wherever opportunity presents itself.

Ukraine by contrast has the Carpathians to its west, a handy little barrier that has deflected invaders of all stripes for millennia. These mountains defend Ukraine against tanks coming from the west as effectively as they protected the Balkans against Mongols attacking from the east. Having the Carpathians as a western border reduces Russia’s massive defensive burden. Most important, if Russia can redirect the resources it would have used for defensive purposes on the Ukrainian frontier — whether those resources be economic, intelligence, industrial, diplomatic or military — then Russia retains at least a modicum of offensive capability. And that modicum of offensive ability is more than enough to overmatch any of Russia’s neighbors (with the exception of China).

When Retreat Ends, the Neighbors Get NervousThis view of Ukraine is not alien to countries in Russia’s neighborhood. They fully understand the difference between a Russia with Ukraine and a Russia without Ukraine, and understand that so long as Ukraine remains independent they have a great deal of maneuvering room. Now that all that remains is the result of an election with no strategic choice at stake, the former Soviet states and satellites realize that their world has just changed.

Georgia traditionally has been the most resistant to Russian influence regardless of its leadership, so defiant that Moscow felt it necessary to trounce Georgia in a brief war in August 2008. Georgia’s poor strategic position is nothing new, but a Russia that can redirect efforts from Ukraine is one that can crush Georgia as an afterthought. That is turning the normally rambunctious Georgians pensive, and nudging them toward pragmatism. An opposition group, the Conservative Party, is launching a movement to moderate policy toward Russia, which among other things would mean abandoning Georgia’s bid for NATO membership and re-establishing formal political ties with Moscow.

A recent Lithuanian power struggle has resulted in the forced resignation of Foreign Minister Minister Vygaudas. The main public point of contention was the foreign minister’s previous participation in facilitating U.S. renditions. Vygaudas, like most in the Lithuanian leadership, saw such participation as critical to maintaining the tiny country’s alliance with the United States. President Dalia Grybauskaite, however, saw the writing on the wall in Ukraine, and feels the need to foster a more conciliatory view of Russia. Part of that meant offering up a sacrificial lamb in the form of the foreign minister.

Poland is in a unique position. It knows that should the Russians turn seriously aggressive, its position on the Northern European Plain makes it the focal point of Russian attention. Its location and vulnerability makes Warsaw very sensitive to Russian moves, so it has been watching Ukraine with alarm for several months.

As a result, the Poles have come up with some (admittedly small) olive branches, including an offer for Putin to visit Gdansk last September in an attempt to foster warmer (read: slightly less overtly hostile) relations. Putin not only seized upon the offer, but issued a public letter denouncing the World War II-era Molotov-Ribbentrop Treaty, long considered by Poles as the most outrageous Russian offense to Poland. Warsaw has since replied with invitations for future visits. As with Georgia, Poland will never be pro-Russian — Poland is not only a NATO member but also hopes to host an American Patriot battery and participate in Washington’s developing ballistic missile defense program. But if Warsaw cannot hold Washington’s attention — and it has pulled out all the stops in trying to — it fears the writing might already be on the wall, and it must plan accordingly.

Azerbaijan has always attempted to walk a fine line between Russia and the West, knowing that any serious bid for membership in something like the European Union or NATO was contingent upon Georgia’s first succeeding in joining up. Baku would prefer a more independent arrangement, but it knows that it is too far from Russia’s western frontier to achieve such unless the stars are somewhat aligned. As Georgia’s plans have met with what can best be described as abject failure, and with Ukraine now appearing headed toward Russian suzerainty, Azerbaijan has in essence resigned itself to the inevitable. Baku is well into negotiations that would redirect much of its natural gas output north to Russia rather than west to Turkey and Europe. And Azerbaijan simply has little else to bargain with.

Other states that have long been closer to Russia, but have attempted to balance Russia against other powers in hopes of preserving some measure of sovereignty, are giving up. Of the remaining former Soviet republics Belarus has the most educated workforce and even a functioning information technology industry, while Kazakhstan has a booming energy industry; both are reasonable candidates for integration into Western systems. But both have this month agreed instead to throw their lots in with Russia. The specific method is an economic agreement that is more akin to shackles than a customs union. The deal effectively will gut both countries’ industries in favor of Russian producers. Moscow hopes the union in time will form the foundation of a true successor to the Soviet Union.

Other places continue to show resistance. The new Moldovan prime minister, Vlad Filat, is speaking with the Americans about energy security and is even flirting with the Romanians about reunification. The Latvians are as defiant as ever. The Estonians, too, are holding fast, although they are quietly polling regional powers to at least assess where the next Russian hammer might fall. But for every state that decides it had best accede to Russia’s wishes, Russia has that much more bandwidth to dedicate to the poorly positioned holdouts.

Russia also has the opportunity. The United States is bogged down in its economic and health care debates, two wars and the Iran question — all of which mean Washington’s attention is occupied well away from the former Soviet sphere. With the United States distracted, Russia has a freer hand in re-establishing control over states that would like to be under the American security umbrella.

There is one final factor that is pushing Russia to resurge: It feels the pressure of time. The post-Cold War collapse may well have mortally wounded the Russian nation. The collapse in Russian births has halved the size of the 0-20 age group in comparison to their predecessors born in the 1970s and 1980s. Consequently, Russian demographics are among the worst in the world.

Even if Russia manages an economic renaissance, in a decade its population will have aged and shrunk to the point that the Russians will find holding together Russia proper a huge challenge. Moscow’s plan, therefore, is simple: entrench its influence while it is in a position of relative strength in preparation for when it must trade that influence for additional time. Ultimately, Russia is indeed going into that good night. But not gently. And not today.

"... President George W. Bush peered into Putin’s eyes and got “a sense of his soul” as someone “very straightforward and trustworthy”?...Ukrainians, whose hard history has immunized them against the folly of wishful thinking, see in Putin’s ferret face the cold eyes of a prison warden."

"Obama participated in waging seven months of war against Libya, a nation not threatening or otherwise important to the United States." "Yet Obama seems so fixated on [the "reset"] that he will not risk annoying Putin by voicing full-throated support for the Ukrainian protesters."

"...this is perhaps the final episode of the Cold War. Does America’s unusually loquacious 44th president remember how the words of the 40th — “Tear down this wall!” — helped to win it?"

IвЂ™ve argued for years that partition is the best solution for Ukraine, which never was a country but an almalgam of provinces left over from failed empiresвЂ“Russian, Austrian, Lithuanian, OttomanвЂ“cobbled together into a Soviet вЂњrepublicвЂќ and cast adrift after the collapse of Communism. Lviv (Lemberg) was a German-speaking city, part of Silesia; before World War II a quarter of its people were Jews. Jews were two-fifths of the population of Odessa.

A fifth of the population, mainly in the East, are ethnic Russians; a tenth, mainly in the West, are Uniate Catholics, who have a special place in Catholic policy since the papacy of John Paul II. Ukrainian nationality is as dubious as Byelorussian nationality: neither of them had a dictionary of their language until 1918.

The country also is a basket case. At its present fertility rate (1.3 children per female), its 47 million people will shrink to only 15 million by the end of the century. There are presently 11 million Ukrainian women aged 15 to 49 (although a very large number are working abroad); by the end of the century this will fall to just 2.8 million. There were 52 million Ukrainian citizens when Communism fell in 1989. Its GDP at about $157 billion is a fifth of TurkeyвЂ™s and half of SwitzerlandвЂ™s. Ukrainians want to join the European Union rather than Russia so they can emigrate. It is of no strategic, economic, or demographic importance to the West.

Assistant Secretary of State Victoria Nuland, whose вЂњF*** the EuropeansвЂќ remark earned her 15 minutes of fame recently, ought to be fired for being plain dumb. I am no admirer of European diplomacy, but Europe will have to pay a good part of the bill for UkraineвЂ™s problems one way or the other. I donвЂ™t see Congress offering $15 billion to support UkraineвЂ™s foreign debt as Russia did last month. The Russians wonвЂ™t abandon Ukraine, which they consider part of their territory, and they certainly wonвЂ™t abandon Russian-speakers вЂњorphanedвЂќ by the collapse of the Soviet Union. What does Ms. Nuland propose: land paratroopers? Just what are we offering to the Ukrainian opposition? American policy has alternated between indifference and impotent posturing. The Nuland tape was painful to hear for its sheer stupidity.

We cannot ignore a humanitarian disaster in a European country. But the idea that we can influence matters by promoting one or another opposition leader, as in the Nuland tape, is ridiculous. There is something we can do, however: Propose a referendum in which the people of Ukraine can choose constitutional alternativesвЂ“partition, confederation, or status quo. And the person who should act for the West is German Chancellor Angela Merkel, for several reasons. First, she has credibility; second, she has guts (she came into politics through the democracy movement in East Germany); third, she speaks Russian and understands Vladimir Putin; fourth, she has more brains than anyone in Washington (a doctorate in quantum chemistry).

Russia never will permit the integration of Ukraine into NATO; were it to come to that, Russia would use force, and the West would stand by cursing. But Russia will settle for half a loaf, namely a Russian-allied Eastern Ukraine. Whatever we do, Ukraine will continue its slow, sad slide into oblivion. The diplomats have the dour duty of managing this decline with the minimum of friction.

I have been making this argument for years. From my 2008 essay, вЂњAmericans Play Monopoly, Russians ChessвЂњ:

On the night of November 22, 2004, then-Russian president вЂ“ now premier вЂ“ Vladimir Putin watched the television news in his dacha near Moscow. People who were with Putin that night report his anger and disbelief at the unfolding вЂњOrangeвЂќ revolution in Ukraine. вЂњThey lied to me,вЂќ Putin said bitterly of the United States. вЂњIвЂ™ll never trust them again.вЂќ The Russians still canвЂ™t fathom why the West threw over a potential strategic alliance for Ukraine. They underestimate the stupidity of the WestвЂ¦.

I will offer the assertion that partition is the destiny of UkraineвЂ¦.

RussiaвЂ™s survival depends not so much on its birth rate, nor on immigration, nor even on prospective annexation, but on the survival of the principle by which Russia was built in the first place. That is why Putin could not abandon the pockets of Russian passport holders in the Caucusus. That Russia history has been tragic, and its nation-building principle brutal and sometimes inhuman, is a different matter. Russia is sufficiently important that its tragedy will be our tragedy, unless averted.

The place to avert tragedy is in Ukraine. Russia will not permit Ukraine to drift to the West. Whether a country that never had an independent national existence prior to the collapse of communism should become the poster-child for national self-determination is a different question. The West has two choices: draw a line in the sand around Ukraine, or trade it to the Russians for something more important.

My proposal is simple: RussiaвЂ™s help in containing nuclear proliferation and terrorism in the Middle East is of infinitely greater import to the West than the dubious self-determination of Ukraine. The West should do its best to pretend that the вЂњOrangeвЂќ revolution of 2004 and 2005 never happened, and secure RussiaвЂ™s assistance in the Iranian nuclear issue as well as energy security in return for an understanding of RussiaвЂ™s existential requirements in the near abroad. Anyone who thinks this sounds cynical should spend a week in Kiev.

Negotiations in Ukraine are evolving quickly, and Ukrainian President Viktor Yanukovich's position appears increasingly precarious. Yanukovich has agreed to hold early presidential and parliamentary elections, according to a Western-mediated plan, Polish Prime Minister Donald Tusk said Feb. 20. The announcement comes after Yanukovich held talks with the Polish, German and French foreign ministers following three days of increased violence in Kiev.

The foreign ministers have also spoken with the moderate opposition leaders. However, the French and Polish foreign ministers have said that there is still no agreement between the sides and that they are returning to talk to Yanukovich.

In addition to elections, the Western-mediated plan includes an interim government and constitutional reform. The agreement to hold new presidential elections would be a large concession by Yanukovich, who has flirted with the idea of parliamentary elections but has staunchly resisted resigning from his own post.Anti-Government Activity In Ukraine As Of Feb. 20Click to Enlarge

Yanukovich is likely to set conditions for the elections -- such as holding them later in the year -- which is why the moderate opposition leaders are rejecting the offer. Moreover, Yanukovich may believe that the radical opposition, which is still amassed in Independence Square, could wreck any truce or agreement. (On Feb. 19, when the moderate opposition and Yanukovich reached a potential agreement, the radical opposition struck up violence in the streets again, quickly breaking the truce.) In the meantime, Yanukovich can claim he gave negotiations an honest chance. Stratfor will be watching for what terms the foreign ministers are taking back to Yanukovich from the moderate opposition leaders and whether the radical opposition leaders will sign on to any deal they did not negotiate.

Even more important is what Russia's reaction to a Western-mediated agreement will be. Russian Prime Minister Dmitri Medvedev was clear earlier Feb. 20 that Moscow was reconsidering its loyalty to the Yanukovich presidency. Apparently the Kremlin is uncertain about the Ukrainian president's ability to control the country. In the past few hours, there has been a flurry of calls between Russian President Vladimir Putin and German Chancellor Angela Merkel and between Putin and Yanukovich. The most pressing issue is whether Russia has signed on to a plan to help remove Yanukovich and bring about new elections.

Ukraine's parliament voted Feb. 21 to release former Prime Minister Yulia Timoshenko from prison. The move will be controversial for President Viktor Yanukovich and will add another layer of political maneuvering to the ongoing crisis that outside groups, such as Russia, could exploit.

Timoshenko has long been a controversial and popular figure in Ukraine. She was part of the coalition that led the Orange Revolution in 2004 and was prime minister in 2005 and 2007-2010. She was considered one of the three major political leaders alongside former President Viktor Yushchenko and Yanukovich. It was the divisions between these three leaders that paralyzed Ukraine for years -- the West and Russia played the political leadership off of each other to influence Ukraine.

In 2011, Timoshenko was charged with abuse of office, stemming from her energy negotiations with Russia that resulted in Moscow winning contracts and pricing preferable to Russia. Yanukovich testified against Timoshenko in criminal court, accusing her of corruption from Russian influence. With her sentencing, Yanukovich eliminated a political competitor, though the West rallied behind Timoshenko during the trial, accusing Yanukovich of political persecution. This became a critical sticking point in the negotiations on trade and association agreements between the European Union and Ukraine, with the European Union demanding the release of Timoshenko in order for the agreements to move forward.

Timoshenko represents the largest threat to Yanukovich should she be released and allowed to run in the upcoming elections. Timoshenko not only has deep ties within Yanukovich's own bloc and Party of Regions, but also appeals to many of the opposition groups, especially those loyal to Arseniy Yatsenyuk. Yatsenyuk is not loyal to Timoshenko -- though the two seem to have a love-hate relationship -- but many in his following could turn to the previous prime minister if she is released. This also complicates any political plans for the rest of the moderate opposition, such as current media favorite Vitali Klitschko, who could see his supporters split to join Timoshenko. Ultimately, Timoshenko appeals to many voters on both sides of the country and is already championed by the outside players in Europe who fought for her release.

Russia has an interest in seeing Timoshenko freed at this stage. Though Timoshenko was part of the Orange movement, she has deep and personal ties to the Kremlin, especially with Russian President Vladimir Putin. It was the personal negotiations between Timoshenko and Putin that shifted Russia's influence in Ukraine's energy sector. On Feb. 20, Russian Prime Minister Dmitri Medvedev said that Yanukovich may no longer be the Ukrainian leader the Kremlin prefers to work with because he has shown he cannot control the country. The political scene is shifting rapidly, but Timoshenko's potential political comeback raises the question of whether Moscow sees her as a possible replacement for Yanukovich.

One of the most important European trading and university cities since the 14th century, modern Lviv has been Soviet Lvov, Polish Lwów and Austro-Hungarian Lemberg in the past 100 years. It was seized by the Soviet Union in 1939 but guerilla resistance was intense, and broken only in the 1950s. Lviv’s sense of its own belonging in Europe was supported by its architecture and its history of resistance to the Soviet rule. It jubilantly supported the Orange revolution in 2004 and was bitterly disillusioned by the failure of that revolution’s leaders, notably Viktor Yushchenko to modernise and reform the country in the years that followed.

SIMFEROPOL, Ukraine—Thousands of Crimean Tatars descended Wednesday on Crimea's parliament to shout down local Russian nationalists, emerging as a bulwark for Kiev's new pro-Europe powers as separatist sentiment in the region grows.

Crimea—a Black Sea peninsula that belonged to Russia until 1954 and remains dominated by ethnic Russians—has swiftly become the epicenter of a backlash against the Kiev protesters who toppled President Viktor Yanukovych . As his opponents build a new government, some of the more radical Russian locals in Crimea are demanding the autonomous region secede or once again become part of Russia.

But Crimean Tatars—indigenous Muslims who account for about 12% of Crimea's population of two million people—are the exception. Their strained relations with Russia go back centuries, and many bristle at the idea of their homeland moving farther into Moscow's orbit. Hundreds traveled to Kiev during the demonstrations to support the pro-Europe camp. In Crimea, they have become the most powerful local advocates for recognizing the new powers and remaining part of Ukraine.

"The Crimean Tatars are the key problem for the Russian nationalists," said Ihor Semyvolos, executive director of the Association of Middle East Studies in Kiev and an expert on the region.

On Wednesday, Ukraine's acting interior minister, Arsen Avakov, said his main task was to prevent the outbreak of armed conflict in Crimea. He said his instructions to all police and security personnel in the region were clear: "Don't provoke any sort of conflict or armed standoff with civilians at any cost."

The tension was palpable Wednesday on the square in Simferopol. "Crimea is Ukraine!" thousands of Tatars shouted while waving Tatar and Ukrainian flags outside the regional legislature, where officials held talks on Crimea's tumult. The Tatars raised their voices and whistled to drown out an opposing crowd of Russians waving Crimean and Russian flags and chanting "Russia!"

"Our biggest demand is to not allow a split of Ukraine," said Elmira Baranova, a 40-year-old Crimean Tatar from Fedosiya, who arrived at the Simferopol rally wrapped in a Ukrainian flag. Ms. Baranova said the Tatars wouldn't "allow Russia to break up Ukraine and take away Crimea." She said her ethnic Russian husband felt the same way, adding that sympathies don't always cleave clearly along ethnic lines.

Refat Chubarov, the Crimean Tatar leader, has called for people promoting separatism to be prosecuted and has said Crimean Tatars won't tolerate a breakup of the country.

Still, pro-Russian sentiment in Crimea runs strong, and the rise of a more nationalist Ukrainian leadership after the collapse of Mr. Yanukovych's government last weekend has alienated some local Russians and fueled talk of separatism.

At one point, the rally Wednesday devolved into shoving and pushing outside the parliament. One person died of a heart attack during the protests, and 30 people were injured in clashes outside the legislative building, Crimea's Ministry of Health said. Six were hospitalized, three in critical condition, the ministry said.

The atmosphere in the region is tense. A Russian businessman has taken control as de facto mayor of Sevastopol, home to the Russian fleet, and called the new powers in Kiev illegitimate. The speaker of the Crimean parliament has floated the idea of secession, though he has since toned down his rhetoric and vowed to fight for more autonomy. Some ethnic Russians have signed up to militias in recent days, saying they must protect their cities from what they call bandits who have taken power in Kiev.

A man holds a single Russian flag while Crimean Tatar activists wave their flags and shout slogans during a rally in Simferopol, Ukraine, on Feb. 26. European Pressphoto Agency

Many local Russians express concern about the role Ukrainian nationalists from the country's west played in toppling Mr. Yanukovych. They worry that under the nationalists' influence, the new government will pursue policies that drive Ukraine away from Russia and crack down on the use of the Russian language. A large swath get their news from Russian outlets, some of which have focused on such fears.

"I don't want to unite with bandits and fascists who will tell me what language to speak or where my place is," said Elena Sokolova, a 36-year-old computer programmer from Simferopol, who was chanting "Russia!" from atop a planter at the rally on Wednesday.

She said Crimea is oriented toward Russia and should be allowed to decide its own fate. "They aren't letting us have a referendum," Ms. Sokolova complained. "They haven't let us have one for 10 years."

The opposition forces that have emerged victorious in Kiev have tried to quell the panic among such ethnic Russians in Crimea. Oleh Tyahnibok, the leader of Ukraine's ultranationalist Svoboda party, played a leading role in the Kiev uprising but has said he won't take a formal position in the new government. He has urged Crimeans to disregard what he called fear-mongering about a ban on the Russian language, as well as false rumors about the supposed arrival of far-right nationalist hoodlums in Crimea.

Still, some decisions by the new provisional powers in Kiev already have stoked anger in the southern region, including the disbanding on Wednesday of the Berkut, a special national antiriot unit that Mr. Yanukovych's government ordered onto Kiev's main square to quell the protests. Berkut officers—many imported to the capital from Mr. Yanukovych's regional strongholds, including Crimea—have become targets of public wrath across much of Ukraine after their clashes with protesters left dozens dead last week.

The decision rattled many in Crimea who have greeted the injured Berkut returning from Kiev as heroes. Russian activists here say Mr. Yanukovych sent the forces to Kiev without proper defenses and subjected them to abuse from protesters before abandoning and embarrassing them. Thousands turned out to a funeral last weekend in Simferopol for some of the local riot police who died in the Kiev clashes. The new Sevastopol mayor, Alexei Chaly vowed Wednesday to retain the Berkut in the Crimean city.

The presence of the Tatars in Crimea, though, suggests the region wouldn't break off without a struggle. For centuries, Tatars controlled the Black Sea peninsula under the Crimean Khanate, a protectorate of the Ottoman Empire before Catherine the Great annexed the region for Russia in 1783. The Russian Empire later fought against the Ottomans, France and Britain over the territory in the 1850s. Crimean War, a conflict famous in part for the role played by British nurse Florence Nightingale.

In 1954, Soviet leader Nikita Khrushchev transferred Crimea from Russia to Ukraine, then both Soviet republics. The peninsula stayed part of independent Ukraine after the Soviet Union's collapse in 1991, despite its majority-Russian population. Crimea still carries the status of an autonomous region, a designation inherited from the Soviet era. That affords the peninsula more powers of self governance than other Ukrainian regions but has stoked separatist sentiment.

Today, many Crimean Tatars still harbor deep resentment against the Kremlin, because of they were deported en masse to Central Asia on the orders of Joseph Stalin. The dictator exiled many of the Soviet Union's ethnic minorities during World War II out of paranoia that they would join with the Nazis and create a fifth column.

Mr. Semyvolos of the Association of Middle East Studies in Kiev says long-term peace in Crimea depends on negotiations among local leaders that take into account the welfare of the Tatars. He said they were largely ignored by Mr. Yanukovych's government, which helped push them into the arms of the protest movement.

"The situation is very complicated," Mr. Semyvolos said. "In this situation you have to be very careful."

President Obama was AWOL on Saturday when his national security team met to discuss the rapidly unfolding events in Ukraine, including Russia’s expanded military presence in the Crimea portion of Ukraine. Only a day before, President Obama had warned Russia that there would be “costs” if it violated Ukraine’s sovereignty. Saturday morning, Russian President Vladimir Putin gave his answer. He thumbed his nose at Obama. Once again, the Obama administration’s vaunted button to “re-set” relations with Russia in a more positive direction has blown up in its face, as Putin continues to play by the rules of realpolitik while Obama flounders. This detached president did not even attend a key national security meeting called to figure out how to best deal with Putin’s latest maneuvers.

Ironically, during the 2012 presidential campaign, President Obama mocked the Republican presidential candidate Mitt Romney for warning about Russia’s “geopolitical” threat. During one of the presidential debates Obama remarked condescendingly about Romney’s warning, “You said Russia. Not Al Qaida. You said Russia. The 1980s are now calling to ask for their foreign policy back because…the cold war’s been over for 20 years.”

In words that Obama should repeat to himself every night before he goes to sleep, Romney responded: “Russia, I indicated, is a geopolitical foe…and I said in the same paragraph I said and Iran is the greatest national security threat we face. Russia does continue to battle us in the U.N. time and time again. I have clear eyes on this. I’m not going to wear rose-colored glasses when it comes to Russia or Mr. Putin…”

Romney was right on both counts. Iran, as it pursues its nuclear arms ambitions, is the greatest national security threat that we face. And, as Russia’s willingness to run interference for the Syrian regime at the UN and its present provocative actions in Ukraine prove, Russia under Putin represents a significant geopolitical threat. Obama unfortunately continues to wear rose-colored glasses when it comes to Iran, as he pursues fruitless negotiations that the Iranian regime is exploiting. And he is now just maybe beginning to take off his rose-colored glasses with respect to Putin’s Russia, as it increasingly flexes its muscles.

Former President George Bush also mistakenly had given Putin the benefit of the doubt back in 2001 when he said, after meeting with Putin, that he thought he could trust the Russian leader. But that was nearly thirteen years ago. Obama has had all the intervening years to observe Putin in action. It became obvious to anyone with his or her eyes wide open that the Russian president operated solely on the basis of realpolitik and was very expert in doing so, as Putin has shown in taking advantage of Obama’s perceived weakness and indecision time and time again.

With respect to the Ukraine crisis, at Putin’s request, the upper house of the Russian Parliament formally granted him the authority to use military force, not just in Crimea but throughout Ukraine. The Russian parliamentary approval for Putin’s use of military force merely ratified the facts on the ground that had already been occurring, as thousands of armed Russian soldiers, often wearing masks and uniforms without any national insignia, reportedly surrounded the regional parliament building and other government facilities in the Crimean capital city of Simferopol. They also effectively closed the region’s two main airports and took control over key communications hubs.

President Obama’s response to Putin’s maneuvers was to call the Russian leader on Saturday and urge him to pull back his military forces or risk isolation in the international community if he refused. Obama also laid out the initial “cost” of Russia’s provocative actions – the U.S. is suspending its participation in preparations for the upcoming Group of 8 economic summit in Sochi, Russia.

“President Obama expressed his deep concern over Russia’s clear violation of Ukrainian sovereignty and territorial integrity, which is a breach of international law,” the White House said in its readout of the call. “The United States condemns Russia’s military intervention into Ukrainian territory. The United States calls on Russia to de-escalate tensions by withdrawing its forces back to bases in Crimea and to refrain from any interference elsewhere in Ukraine.”

The Kremlin provided its own readout of the call. It said that Putin pointed out to Obama the “real threat to the lives and health of Russian citizens” currently in Ukraine, and referred to “the provocative and criminal actions on the part of ultranationalists who are in fact being supported by the current authorities in Kiev.”

Meanwhile, at United Nations headquarters in New York, an emergency meeting of the UN Security Council was held on Saturday afternoon to discuss the Ukrainian crisis – the second such meeting in two days. For the first two hours, the Security Council members wrangled behind closed doors on whether they should hold their discussions in public or in private consultations. They reached a compromise of sorts – a brief public meeting followed by much lengthier closed door consultations.

During the open meeting, UN Deputy Secretary General Jan Eliasson called for restoration of calm and dialogue among all concerned parties. “Now is the time for cool heads to prevail,” he advised. His advice was promptly ignored. The verbal sparks were flying, reminiscent of Cold War sparring in the Security Council that had often paralyzed the UN body from taking any effective action.

The Ukrainian ambassador to the UN, Yuriy Sergeyev, who was invited to attend the open meeting on Saturday, accused Russia of “an act of aggression” in “severe violation of international law.” He added that the “Russian Federation brutally violated the basic principles of Charter of the United Nations obliging all member states to refrain from the threat or use of force against the territorial integrity or political independence of any state.” He called for the members of the Security Council to take a stand against Russian aggression that interfered with Ukraine’s sovereignty and territorial integrity. He repeated these themes in remarks to the press after his Security Council statement. He also defended the legality of the Ukrainian parliament’s removal of the ousted Ukrainian President Viktor Yanukovych, who has sought refuge in Russia.

Russian UN Ambassador Vitaly Churkin told the Security Council that Russia had acted at the request of the regional authorities in Crimea, making a dubious distinction in claiming that Russian troops could be deployed “on the territory of Ukraine,” but not “against Ukraine.” In response to calls for Russia to refrain from intervention to protect its interests, he said that “[W]e can’t agree with this at all.” Churkin lashed out at the “radicals” in the “illegal” government in Kiev who were allegedly threatening peace and security in Crimea. He questioned the legality of the manner in which Yanukovych was removed from office, noting that Yanukovych had been democratically elected.

Churkin did not speak to reporters on Saturday, but the previous day he had told reporters that the new government in Kiev was not representative of all political factions of Ukraine and was trying to impose its political will on the rest of the country. He accused the European Union of treating Ukraine as its “province” and charged that it was the West’s interference that had helped cause the Ukrainian crisis in the first place.

U.S. Ambassador to the UN Samantha Power expressed the strong support of the U.S. for the new government of Ukraine in her remarks to the Security Council on Saturday. Russia’s “intervention is without legal basis – indeed it violates Russia’s commitment to protect the sovereignty, territorial integrity, and independence of Ukraine,” she said. “It is time for the Russian intervention in Ukraine to end.” Ambassador Power also accused the Russians of double standards with regard to its position on national sovereignty. “It is ironic that the Russian Federation regularly goes out of its way in this Chamber to emphasize the sanctity of national borders and of sovereignty,” she said, “but Russian actions in Ukraine are violating the sovereignty of Ukraine and pose a threat to peace and security.”

Ambassador Power proposed that international monitors and observers – including from the UN and OSCE [Organization for Security and Co-operation in Europe, in which Russia and Ukraine are members] be sent to Ukraine. “That’s the best way to get the facts, monitor conduct, and prevent any abuses,” she said. Russia so far has shown little inclination to accept this proposal.

In remarks to the press after the completion of the Security Council’s closed door consultations, Ambassador Power said that Russia’s “military presence in Crimea is a violation of international law.”

While the situation on the ground in Ukraine continues to deteriorate, including the Ukrainian naval chief’s pledge of allegiance to the Crimean pro-Russia authorities who are defying the authority of the new central government in Kiev, the war of words from the Obama administration continued to escalate on Sunday. Secretary of State John Kerry warned on “Meet the Press” that Russia was facing isolation and opprobrium from the international community, which could result in trade and investment penalties, asset freezes, denial of visas, and even possible expulsion from the G-8. He accused Putin of “possibly trying to annex Crimea” and said that Russia was displaying 19th century behavior in the 21st century by committing “aggression” on a “phony pretext.” That said, any military option by the U.S. in response to Russia’s actions appears to be off the table at least for now.

What is evident from this serious crisis is that President Obama’s attempt to reset relations with Russia at the outset of his first term has been a dismal failure. He demonstrated weakness when he dropped plans to locate missile interceptors and a radar station in Poland and the Czech Republic without getting anything in return. In March 2012, Obama was overheard on an open mike telling outgoing Russian President Dmitry Medvedev that, since he would not be running again for president after the 2012 election, he would have “more flexibility” in dealing with Russia on such matters as missile defense. Medvedev replied: “I understand. I will transmit this information to Vladimir,” a reference to the real power in Russia, Vladimir Putin, who would soon re-assume the presidency. Putin has taken Obama’s measure and is out-maneuvering him at every turn.

In a prior article I theorized that perhaps Obama had decided to support the protests against the Russian-allied ousted president Yanukovych in order to put Russia on defense and “divert Putin’s attention away from the Middle East by causing him to redirect money and resources closer to home.” If so, the strategy appears to be backfiring since Putin is proving that he is perfectly capable of deploying a few thousand troops in Crimea while still continuing to provide active support to the Assad regime. He is simply allowing the presence of Russian troops, without any full-scale Russian occupation, to catalyze a popular movement in Crimea by its Russian speaking majority to push for breaking away completely from Ukraine.

More likely, there was no real Obama offensive strategy playing out in Ukraine and no clear-eyed thinking on what real national security and geopolitical threats we face, much less on how to handle them. Instead, President Obama is reverting to his lead-from-behind, reactive approach to most major foreign policy crises he has faced. Obama owes Mitt Romney an immediate apology.

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"You have enemies? Good. That means that you have stood up for something, sometime in your life." - Winston Churchill.

In the latest anti-Semitic attack in the Ukraine, vandals on Friday sprayedswastikas and graffiti reading "Death to the Jews" on a synagogue in Simferopol inthe Crimea region, reported the Israel Hayom daily newspaper. "There is no doubtthat it was important to anti-Semites to commit this crime," Anatoly Gendin, head ofthe Association of Jewish Organizations and Communities of Crimea, told thenewspaper. "Since the crisis started, prices have risen by 30 percent and peoplearen't receiving their pensions. As always, the Jews are being blamed, and I'mscared to think where it could progress," he added. The anti-Semitic incident inCrimea took place the same day that the Russians began to take over the peninsula.

According to the Jewish community leader, to get to the building the vandals had toclimb the 2-meter wall that surrounds the synagogue compound. Rabbi Misha Kapustin,a leader in the Crimean Jewish community, told Israel Hayom that he had askedworshippers to stay away from the site. "This was the first time in my life that asynagogue was closed," he said. "I realized that the situation wouldn't get better.We don't need to wait for them to riot against us." Rabbi Kapustin added thatintends to write a letter to a number of heads of state, appealing to them to do"whatever is in their power to prevent a Russian invasion. To [ask them to] notabandon Ukrainian Jews."

Anti-Semitic incidents have been recorded in Ukraine for many years, but have beenon the rise recently, in the wake of the unrest there that toppled ViktorYanukovych. In January, unknown assailants stabbed a hareidi man in Kiev as he wasmaking his way home from synagogue on a Friday night. As the political situation inthe country worsened, reports indicated that extremists have been targeting theJewish community in Ukraine, including a member of the opposition. A synagoguesoutheast of Kiev was firebombed last week by unknown assailants. At the same time,reported Israel Hayom, other voices are also making themselves heard in Crimea. Arepresentative of the pro-Russian party that controls the Sevastopol city councilsaid that "there are no soldiers or armed people in the streets. There aren't a lotof Jews here, but those who are left can relax." The Rabbi of the city of Kharkov,Rabbi Moshe Moskowitz, told Arutz Sheva last week that a number of local Jews havealready expressed a desire to leave Ukraine and emigrate to Israel. The unrest ofrecent month is what has brought this desire to the fore, he said. MK Rina Frankel(Yesh Atid) has called on Prime Minister Binyamin Netanyahu to launch an emergencyaliyah operation to bring Ukrainian Jewry to safety as a result of the unrest.

The two Western powers signed an agreement with Ukraine in 1994, which Kiev's parliament wants enforcing now. The Budapest Memorandum, signed by Bill Clinton, John Major, Boris Yeltsin and Leonid Kuchma – the then-rulers of the USA, UK, Russia and Ukraine – promises to uphold the territorial integrity of Ukraine, in return for Ukraine giving up its nuclear weapons.

Article one reads: "The United States of America, the Russian Federation, and the United Kingdom of Great Britain and Northern Ireland, reaffirm their commitment to Ukraine ... to respect the Independence and Sovereignty and the existing borders of Ukraine."

And Kiev is now claiming that their country's borders are not being respected.

CNN author makes a bunch of straw arguments in the '5 myths' format, IMHO.http://www.cnn.com/2014/03/08/opinion/miller-five-myths-about-ukraine-crisis/index.html?hpt=hp_t4Myth 1. We're back in the Cold War - No, we are in a new one. 2. Putin is Hitler - No one is Hitler, but the similarities are worth noting. "Russia believed its vital interests in Ukraine were threatened and it had the means, will, and proximity to act on them. And it's about time we faced up to it." - Hitler I suppose had his apologists in the west as well.3. It's all Obama's fault - No, not the motives or the exact events, but the timing is certainly tied to perceived American weakness.4. Bombing Syria would have saved Ukraine - Bombing Syria wasn't anyone's proposal in total, but actually it probably would have slowed Putin and saved Ukraine as we knew it.5. Ukraine can have a 'Hollywood' ending - The goal of peace through strength and deterrence is not to have a happy ending to a brutal, hard fought, nuclear confrontation. The author is either too deep in his cocoon to know that or is intentionally obfuscating. Perfect example of what we mean by mainstream or lamestream media coverage, where the more you read the less you know.

KIEV, Ukraine — OVER the past two weeks, residents of Kiev have lived through its bloodiest conflict since the Second World War, watched their reviled president flee and a new, provisional team take charge, seen Russian troops take control of part of the country, and heard Russia’s president, Vladimir V. Putin, assert his right to take further military action. Yet the Ukrainian capital is calm.

Revolutions often falter on Day 2, as Ukraine has already bitterly learned twice — once after the 1991 collapse of the Soviet Union and then again in 2005 after the Orange Revolution. That could happen again, but the new revolution is enjoying a prolonged honeymoon, thanks to Mr. Putin, whose intervention in Ukrainian foreign and trade policy provoked the uprising in the first place, and whose invasion has, paradoxically, increased its chance of long-term success.

Kiev smells like a smoky summer camp, from the bonfires burning to keep the demonstrators still out on Independence Square warm, but every day it is tidier. Sidewalks in the city center are checkerboarded with neat piles of bricks that had been dug up to serve as missiles and are now being put back.

The police, despised for their corruption and repression, are returning to work. Their squad cars often sport Ukrainian flags and many have a “self-defense” activist from the protests with them. A Western ambassador told me that the activists were there to protect the cops from angry citizens. My uncle, who lives here, said they were also there to stop the police from slipping back into their old ways and demanding bribes.

This revolution may yet be eaten by its own incompetence or by infighting. A presidential election is scheduled for May, and the race, negative campaigning and all, has quietly begun. The oligarchs, some of whom have cannily been appointed governors of the potentially restive eastern regions, are jockeying for power. But for now, Ukrainians, who were brought together by shared hatred of the former president, Viktor F. Yanukovych, are being brought closer still by the Kremlin-backed invasion.

“Yanukovych freed Ukraine and Putin is uniting it,” said Iegor Soboliev, a 37-year-old ethnic Russian who heads a government commission to vet officials of the former regime. “Ukraine is functioning not through its government but through the self-organization of its people and their sense of human decency.”

Mr. Soboliev is a former investigative journalist who grew frustrated that carefully documented revelations of government misbehavior — which he says “wasn’t merely corruption, it was marauding” — were having no impact. He and a few friends formed Volya, a movement dedicated to creating a country of “responsible citizens” and a “state worthy of their trust.”

“People in Odessa, Mykolaiv, Donetsk and Dnipropetrovsk are coming out to defend their country,” Mr. Soboliev said. “They have never liked the western Ukrainian, Galician point of view. But they are showing themselves to be equally patriotic. They are defending their country from foreign aggression. Fantastical things are happening.”

This conflict could flare into Europe’s first major war of the 21st century, and Crimea may never again be part of Ukraine. But no matter what happens over the next few months, or even years, Mr. Putin and his vision of an authoritarian, Russian-dominated former Soviet space have already lost. Democratic, independent Ukraine, and the messy, querulous (but also free and law-abiding) European idea have won.

So far, the only certain victory is the ideological one. Many outsiders have interpreted the past three months as a Yugoslav-style ethno-cultural fight. It is nothing of the kind. This is a political struggle. Notwithstanding the bloodshed, the best parallel is with Prague’s Velvet Revolution of 1989. The emphasis there on changing society’s moral tone, and each person’s behavior, was likewise central to the protests that overthrew Mr. Yanukovych.

For Ukraine, as well as for Russia and much of the former U.S.S.R., the collapse of the Soviet Union in 1991 was only a partial revolution. The U.S.S.R. vanished, but the old nomenklatura, and its venal, authoritarian style of governance remained. Mr. Putin is explicitly drawing on that heritage and fitfully trying to reshape it into a new state capitalist system that can compete and flourish globally. An alliance with Mr. Yanukovych’s Ukraine was an essential part of that plan.

That effort has now failed. Whatever Mr. Putin achieves in Ukraine, it will not be partnership with a Slavic younger brother enthusiastically joining in his neo-imperialist, neo-Soviet project.

The unanswered question is whether Ukraine can be a practical success. The economy needs a total structural overhaul — and that huge shift needs to be accomplished while either radically transforming, or creating from scratch, effective government institutions.

This is the work Central Europe and the Baltic states did in the 1990s. Their example shows that it can be done, but it takes a long time, requires a patient and united populace, and probably also the promise of European partnership.

The good news is that Ukraine may finally have achieved the necessary social unity. The bad news is that it isn’t clear if Europe, struggling with its economic malaise and ambivalence toward its newish eastern members, has the stomach to tutor and support Ukraine as it did the Visegrad countries — Hungary, the Czech Republic, Slovakia and Poland — and the Baltic states.

THIS should be Ukraine’s biggest problem. But with Russian forces in Crimea, the more urgent question Kiev faces is whether it will find itself at war.

The answer depends in large part on Russia. Sergei Kovalev, a former dissident who became a member of the Russian Parliament in the 1990s, once told me that a good rule for understanding Russian strongmen was that “eating increases the appetite.” Mr. Putin has thus far lived up to that aphorism.

Thanks to his agility in Syria, his successful hosting of the Sochi Olympics and even, at first, his masterful manipulation of Mr. Yanukovych, Mr. Putin has won himself something of a reputation as a master strategist. But he has made a grave miscalculation in Ukraine.

For one thing, Mr. Putin misunderstands the complexities of language and ethnicity in Ukraine. Certainly, Ukraine is diverse, and language, history and culture play a role in some of its internal differences — just as they do in blue- and red-state America, in northern and southern Italy, or in the north and the south of England.

The error is to believe there is a fratricidal separation between Russian and Ukrainian speakers and to assume that everyone who speaks Russian at home or voted for Mr. Yanukovych would prefer to be a citizen of Mr. Putin’s Russia. The reality of Ukraine is that everyone in the country speaks and understands Russian and everyone at least understands Ukrainian. On television, in Parliament, and in the streets, bilingual discussions are commonplace.

Mr. Putin seems to have genuinely believed that Ukraine was Yugoslavia, and that his forces would be warmly welcomed by at least half of the country. As Leonid D. Kuchma, a former president of Ukraine and once a senior member of the Soviet military-industrial complex, told me: “His advisers must have thought they would be met in eastern Ukraine with flowers as liberators. The reality is 180 degrees opposite.”

Many foreign policy realists wish the Ukrainian revolution hadn’t happened. They would rather Ukraine had more fully entered the corrupt, authoritarian zone the Kremlin is seeking to consolidate. But we don’t get to choose for Ukraine — Ukrainians do, and they have. Now we have to choose for ourselves.

1. Mr. Putin says: Russian forces in Crimea are only acting to protect Russian military assets. It is “citizens’ defense groups,” not Russian forces, who have seized infrastructure and military facilities in Crimea.

The Facts: Strong evidence suggests that members of Russian security services are at the heart of the highly organized anti-Ukraine forces in Crimea. While these units wear uniforms without insignia, they drive vehicles with Russian military license plates and freely identify themselves as Russian security forces when asked by the international media and the Ukrainian military. Moreover, these individuals are armed with weapons not generally available to civilians.

2. Mr. Putin says: Russia’s actions fall within the scope of the 1997 Friendship Treaty between Ukraine and the Russian Federation.

The Facts: The 1997 agreement requires Russia to respect Ukraine’s territorial integrity. Russia’s military actions in Ukraine, which have given them operational control of Crimea, are in clear violation of Ukraine’s territorial integrity and sovereignty.

3. Mr. Putin says: The opposition failed to implement the February 21 agreement with former Ukrainian President Viktor Yanukovych.

The Facts: The February 21 agreement laid out a plan in which the Rada, or Parliament, would pass a bill to return Ukraine to its 2004 Constitution, thus returning the country to a constitutional system centered around its parliament. Under the terms of the agreement, Yanukovych was to sign the enacting legislation within 24 hours and bring the crisis to a peaceful conclusion. Yanukovych refused to keep his end of the bargain. Instead, he packed up his home and fled, leaving behind evidence of wide-scale corruption.

4. Mr. Putin says: Ukraine’s government is illegitimate. Yanukovych is still the legitimate leader of Ukraine.

The Facts: On March 4, President Putin himself acknowledged the reality that Yanukovych “has no political future.” After Yanukovych fled Ukraine, even his own Party of Regions turned against him, voting to confirm his withdrawal from office and to support the new government. Ukraine’s new government was approved by the democratically elected Ukrainian Parliament, with 371 votes – more than an 82% majority. The interim government of Ukraine is a government of the people, which will shepherd the country toward democratic elections on May 25th – elections that will allow all Ukrainians to have a voice in the future of their country.

5. Mr. Putin says: There is a humanitarian crisis and hundreds of thousands are fleeing Ukraine to Russia and seeking asylum.

The Facts: To date, there is absolutely no evidence of a humanitarian crisis. Nor is there evidence of a flood of asylum-seekers fleeing Ukraine for Russia. International organizations on the ground have investigated by talking with Ukrainian border guards, who also refuted these claims. Independent journalists observing the border have also reported no such flood of refugees.

6. Mr. Putin says: Ethnic Russians are under threat.

The Facts: Outside of Russian press and Russian state television, there are no credible reports of any ethnic Russians being under threat. The new Ukrainian government placed a priority on peace and reconciliation from the outset. President Oleksandr Turchynov refused to sign legislation limiting the use of the Russian language at regional level. Ethnic Russians and Russian speakers have filed petitions attesting that their communities have not experienced threats. Furthermore, since the new government was established, calm has returned to Kyiv. There has been no surge in crime, no looting, and no retribution against political opponents.

7. Mr. Putin says: Russian bases are under threat.

The Facts: Russian military facilities were and remain secure, and the new Ukrainian government has pledged to abide by all existing international agreements, including those covering Russian bases. It is Ukrainian bases in Crimea that are under threat from Russian military action.

8. Mr. Putin says: There have been mass attacks on churches and synagogues in southern and eastern Ukraine.

The Facts: Religious leaders in the country and international religious freedom advocates active in Ukraine have said there have been no incidents of attacks on churches. All of Ukraine’s church leaders, including representatives of the Ukrainian Orthodox Church-Moscow Patriarchate, have expressed support for the new political leadership, calling for national unity and a period of healing. Jewish groups in southern and eastern Ukraine report that they have not seen an increase in anti-Semitic incidents.

9. Mr. Putin says: Kyiv is trying to destabilize Crimea.

The Facts: Ukraine’s interim government has acted with restraint and sought dialogue. Russian troops, on the other hand, have moved beyond their bases to seize political objectives and infrastructure in Crimea. The government in Kyiv immediately sent the former Chief of Defense to defuse the situation. Petro Poroshenko, the latest government emissary to pursue dialogue in Crimea, was prevented from entering the Crimean Rada.

10. Mr. Putin says: The Rada is under the influence of extremists or terrorists.

The Facts: The Rada is the most representative institution in Ukraine. Recent legislation has passed with large majorities, including from representatives of eastern Ukraine. Far-right wing ultranationalist groups, some of which were involved in open clashes with security forces during the EuroMaidan protests, are not represented in the Rada. There is no indication that the Ukrainian government would pursue discriminatory policies; on the contrary, they have publicly stated exactly the opposite.

Public discussion on Ukraine is all about confrontation. But do we know where we are going? In my life, I have seen four wars begun with great enthusiasm and public support, all of which we did not know how to end and from three of which we withdrew unilaterally. The test of policy is how it ends, not how it begins.

Far too often the Ukrainian issue is posed as a showdown: whether Ukraine joins the East or the West. But if Ukraine is to survive and thrive, it must not be either sideвЂ™s outpost against the other вЂ” it should function as a bridge between them.

Russia must accept that to try to force Ukraine into a satellite status, and thereby move RussiaвЂ™s borders again, would doom Moscow to repeat its history of self-fulfilling cycles of reciprocal pressures with Europe and the United States.

The West must understand that, to Russia, Ukraine can never be just a foreign country. Russian history began in what was called Kievan-Rus. The Russian religion spread from there. Ukraine has been part of Russia for centuries, and their histories were intertwined before then. Some of the most important battles for Russian freedom, starting with the Battle of Poltava in 1709, were fought on Ukrainian soil. The Black Sea Fleet вЂ” RussiaвЂ™s means of projecting power in the Mediterranean вЂ” is based by long-term lease in Sevastopol, in Crimea. Even such famed dissidents as Aleksandr Solzhenitsyn and Joseph Brodsky insisted that Ukraine was an integral part of Russian history and, indeed, of Russia.

The European Union must recognize that its bureaucratic dilatoriness and subordination of the strategic element to domestic politics in negotiating UkraineвЂ™s relationship to Europe contributed to turning a negotiation into a crisis. Foreign policy is the art of establishing priorities.

The Ukrainians are the decisive element. They live in a country with a complex history and a polyglot composition. The Western part was incorporated into the Soviet Union in 1939 , when Stalin and Hitler divided up the spoils. Crimea, 60 percent of whose population is Russian , became part of Ukraine only in 1954 , when Nikita Khrushchev, a Ukrainian by birth, awarded it as part of the 300th-year celebration of a Russian agreement with the Cossacks. The west is largely Catholic; the east largely Russian Orthodox. The west speaks Ukrainian; the east speaks mostly Russian. Any attempt by one wing of Ukraine to dominate the other вЂ” as has been the pattern вЂ” would lead eventually to civil war or break up. To treat Ukraine as part of an East-West confrontation would scuttle for decades any prospect to bring Russia and the West вЂ” especially Russia and Europe вЂ” into a cooperative international system.

Ukraine has been independent for only 23 years; it had previously been under some kind of foreign rule since the 14th century. Not surprisingly, its leaders have not learned the art of compromise, even less of historical perspective. The politics of post-independence Ukraine clearly demonstrates that the root of the problem lies in efforts by Ukrainian politicians to impose their will on recalcitrant parts of the country, first by one faction, then by the other. That is the essence of the conflict between Viktor YanuВ¬kovych and his principal political rival, Yulia TymoВ-shenko. They represent the two wings of Ukraine and have not been willing to share power. A wise U.S. policy toward Ukraine would seek a way for the two parts of the country to cooperate with each other. We should seek reconciliation, not the domination of a faction.

Russia and the West, and least of all the various factions in Ukraine, have not acted on this principle. Each has made the situation worse. Russia would not be able to impose a military solution without isolating itself at a time when many of its borders are already precarious. For the West, the demonization of Vladimir Putin is not a policy; it is an alibi for the absence of one.

Putin should come to realize that, whatever his grievances, a policy of military impositions would produce another Cold War. For its part, the United States needs to avoid treating Russia as an aberrant to be patiently taught rules of conduct established by Washington. Putin is a serious strategist вЂ” on the premises of Russian history. Understanding U.S. values and psychology are not his strong suits. Nor has understanding Russian history and psychology been a strong point of U.S. policymakers.

Leaders of all sides should return to examining outcomes, not compete in posturing. Here is my notion of an outcome compatible with the values and security interests of all sides:

1. Ukraine should have the right to choose freely its economic and political associations, including with Europe.

2. Ukraine should not join NATO, a position I took seven years ago, when it last came up.

3. Ukraine should be free to create any government compatible with the expressed will of its people. Wise Ukrainian leaders would then opt for a policy of reconciliation between the various parts of their country. Internationally, they should pursue a posture comparable to that of Finland. That nation leaves no doubt about its fierce independence and cooperates with the West in most fields but carefully avoids institutional hostility toward Russia.

4. It is incompatible with the rules of the existing world order for Russia to annex Crimea. But it should be possible to put CrimeaвЂ™s relationship to Ukraine on a less fraught basis. To that end, Russia would recognize UkraineвЂ™s sovereignty over Crimea. Ukraine should reinforce CrimeaвЂ™s autonomy in elections held in the presence of international observers. The process would include removing any ambiguities about the status of the Black Sea Fleet at Sevastopol.

These are principles, not prescriptions. People familiar with the region will know that not all of them will be palatable to all parties. The test is not absolute satisfaction but balanced dissatisfaction. If some solution based on these or comparable elements is not achieved, the drift toward confrontation will accelerate. The time for that will come soon enough.

Ukraine's independence from the Soviet Union was followed by the privatization of state-owned assets, giving birth to a powerful class of business leaders known as oligarchs. Since the country's founding, they have played a crucial role in the political system -- there are close ties between Ukraine's oligarchs and the evolution of the country's political crisis. This was most recently illustrated in Donetsk on March 9, when Ukrainian presidential hopeful Vitali Klitschko met with Rinat Akhmetov, the country's richest man, to discuss the ongoing situation.

The oligarchs function as a bridge between the Western-leaning interim government and Russia's interests in the country, especially in the Ukrainian east. They will play a key role in negotiations over Ukraine's political future and will prove pivotal in shaping any Ukrainian administration's relationship with Russia.

Analysis

Similar to Russia, the rapid transition to capitalism in Ukraine allowed politically connected individuals to amass tremendous wealth as they acquired and monopolized assets spanning the country's metals, chemicals and energy distribution industries, among others. But Russia has a long tradition of centralized power, and as the Kremlin regained its strength, Moscow subsumed or eliminated these wealthy individuals. Kiev wields no such political might. Ukraine's oligarchs were never fully subordinated by the government; their power only grew.

The result is a political system in Ukraine that continues to depend highly on the patronage and support of oligarchs. All major political parties and candidates for powerful posts in parliament and the executive office have their respective oligarch backers. For instance, figures such as Akhmetov, who holds a dominant position in the country's steel and coal production, and Dmytro Firtash, a major player in the power and chemicals industry, have been leading financiers of former Ukrainian President Viktor Yanukovich's Party of Regions. Other oligarchs, such as Igor Kolomoisky, a banking and industrial magnate, have kept out of direct politics, forging short-term situational alliances with various politicians.

The Oligarchs' Main Allegiance

The fidelity of the oligarchs has proved to be fluid. They are most concerned about preserving their lucrative business interests rather than pursuing an ideological or political line. Oligarchs have shifted their support of specific candidates. In some cases, such as Akhmetov, they have backed rival parties to make sure they would not be targeted in the event of a political upheaval. Any trend that compromises oligarch interests -- for example the emergence of a rival oligarch clan from within Yanukovich's family -- can be politically dangerous.

The latest crisis in Ukraine has produced just such a shift, and the reaction of the oligarchs has once again revealed their important role in the country. The oligarchs have quickly distanced themselves from Yanukovich and now support the new government in Kiev. Though this government has gone after Yanukovich and his inner circle, authorities have been extremely careful not to target the oligarchs who previously supported his party. They know such a move could create backlash among key political power brokers, and their legitimacy depends on maintaining at least a pragmatic relationship with the oligarchs. Prime Minister Arseniy Yatsenyuk and other members of the interim government have reached out to figures including Akhmetov and Firtash, assuring them that their businesses will not be targeted. Kiev has even appointed key oligarchs such as Kolomoisky and industrialist Sergei Taruta as governors in the eastern regions of Dnipropetrovsk and Donetsk, respectively.

The Key to National Cohesion

With presidential elections set for May 25 and parliamentary elections likely to be held later in the year, Ukraine's current administration will need the continued support of the oligarchs. More immediately, with Crimea on the verge of leaving Ukraine, the new government's urgent challenge is to keep mainland Ukraine together. Eastern Ukraine is crucial to this -- the region is a stronghold for pro-Russia sentiment and the main site of opposition, after Crimea, to the Western-backed and Western-leaning government.

The oligarchs are key to keeping control over eastern Ukraine, not only because Ukraine's industrial production is concentrated in the east -- thus anchoring a shaky economy -- but also because many of the oligarchs have a stronger and more manageable relationship with Russia than the current government, which Moscow sees as illegitimate. Many of these business leaders hail from the industrial east. They have business ties to Russia and decades of experience dealing with Russian authorities -- experience that figures such as Klitschko and Yatsenyuk lack.

So far, the new government has been able to maintain the support of the country's most important oligarchs. In general, the oligarchs want Ukraine to stay united. They do not support partition or federalization, because this would compromise their business interests across the country. But this support is not guaranteed over the long term. There have been recent complaints about the new government, for example over the arrest of former Kharkiv Gov. Mikhail Dobkin. Akhmetov came out in Dobkin's defense, saying the government should not be going after internal rivals right now, but rather focusing on concerns over Russia. This can be seen as a warning to the new administration: The oligarchs' loyalty to the current regime is conditional and should not be taken for granted.

Ultimately, the biggest threat to the oligarchs is not the current government, over which they have substantial leverage, but Russia. The oligarchs stand to lose a great deal if Russia intervenes in eastern Ukraine. If Russia takes over eastern territories, it could threaten the oligarchs' very control over their assets. Therefore they have an interest in bridging the gap between Russia and Kiev, but it is Moscow they fear more. The oligarchs have substantial power to shape the Ukrainian government's decision-making as it moves forward. Their business interests and the territorial integrity of the country are at stake.

Just days before the Ukrainian crisis broke out, I took an overnight train to Kiev from Sevastopol in Crimea. Three mechanics in their 30s on their way to jobs in Estonia shared my compartment. All ethnic Russians born and raised in Sevastopol, they have made the trip to the Baltic states for the past eight years for seasonal work at Baltic Sea shipyards. Our ride together, accompanied by obligatory rounds of vodka, presented the opportunity for an in-depth discussion of Ukraine's political crisis. The ensuing conversation was perhaps more enlightening than talks of similar length with Ukrainian political, economic or security officials.

My fellow passengers viewed the events at Independence Square in an overwhelmingly negative light. They considered the protesters camped out in Kiev's central square terrorists, completely organized and financed by the United States and the European Union. They did not see the protesters as their fellow countrymen, and they supported then-President Viktor Yanukovich's use of the Berkut security forces to crack down on them. In fact, they were shocked by the Berkut's restraint, saying if it had been up to them, the protests would have been "cleaned up" from the outset. They added that while they usually looked forward to stopping over in Kiev during the long journey to the Baltics, this time they were ashamed of what was happening there and didn't even want to set foot in the city. They also predicted that the situation in Ukraine would worsen before it improved.

A few days later, the protests in Independence Square in fact reached a crescendo of violence. The Berkut closed in on the demonstrators, and subsequent clashes between protesters and security forces throughout the week left dozens dead and hundreds injured. This spawned a sequence of events that led to the overthrow of Yanukovich, the formation of a new Ukrainian government not recognized by Moscow and the subsequent Russian military intervention in Crimea. While the speed of these events astonished many foreign (especially Western) observers, to the men I met on the train, it was all but expected.

After all, the crisis didn't emerge from a vacuum. Ukraine was a polarized country well before the Euromaidan movement took shape. I have always been struck by how traveling to different parts of Ukraine feels like visiting different countries. Every country has its regional differences, to be sure. But Ukraine stands apart in this regard. Ukraine's East-West Divide

Traveling in Lviv in the west, for example, is a starkly different experience than traveling in Donetsk in the east. The language spoken is different, with Ukrainian used in Lviv and Russian in Donetsk. The architecture is different, too, with classical European architecture lining narrow cobblestoned streets in Lviv and Soviet apartment blocs alongside sprawling boulevards predominating in Donetsk. Each region has different heroes: A large bust of Lenin surveys the main square in Donetsk, while Stepan Bandera, a World War II-era Ukrainian nationalist revolutionary, is honored in Lviv. Citizens of Lviv commonly view people from Donetsk as pro-Russian rubes while people in Donetsk constantly speak of nationalists/fascists in Lviv.

Lviv and Donetsk lie on the extreme ends of the spectrum, but they are hardly alone. Views are even more polarized on the Crimean Peninsula, where ethnic Russians make up the majority and which soon could cease to be part of Ukraine.

The east-west Ukrainian cultural divide is deep, and unsurprisingly it is reflected in the country's politics. Election results from the past 10 years show a clear dividing line between voting patterns in western and central Ukraine and those in the southern and eastern parts of the country. In the 2005 and 2010 presidential elections, Yanukovich received overwhelming support in the east and Crimea but only marginal support in the west. Ukraine does not have "swing states."

Such internal political and cultural divisions would be difficult to overcome under normal circumstances, but Ukraine's geographic and geopolitical position magnifies them exponentially. Ukraine is the quintessential borderland country, eternally trapped between Europe to the west and Russia to the east. Given its strategic location in the middle of the Eurasian heartland, the country has constantly been -- and will constantly be -- an arena in which the West and Russia duel for influence.

Competition over Ukraine has had two primary effects on the country. The first is to further polarize Ukraine, splitting foreign policy preferences alongside existing cultural divisions. While many in western Ukraine seek closer ties with Europe, many in eastern Ukraine seek closer ties with Russia. While there are those who would avoid foreign entanglements altogether, both the European Union and Russia have made clear that neutrality is not an option. Outside competition in Ukraine has created wild and often destabilizing political swings, especially during the country's post-Soviet independence.

Therefore, the current crisis in Ukraine is only the latest manifestation of competition between the West and Russia. The European Union and the United States greatly influenced the 2004 Orange Revolution in terms of financing and political organization. Russia meanwhile greatly influenced the discrediting of the Orange Regime and the subsequent election of Yanukovich, who lost in the Orange Revolution, in 2010. The West pushed back once more by supporting the Euromaidan movement after Yanukovich abandoned key EU integration deals, and then Russia countered in Crimea, leading to the current impasse.

The tug of war between Russia and the West over Ukraine has gradually intensified over the past decade. This has hardened positions in Ukraine, culminating in the formation of armed groups representing rival political interests and leading to the violent standoff in Independence Square that quickly spread to other parts of the country.

The current government enjoys Western support, but Moscow and many in eastern and southern Ukraine deny its legitimacy, citing the manner in which it took power. This sets a dangerous precedent because it challenges the sitting government's and any future government's ability to claim any semblance of nationwide legitimacy.

It is clear that Ukraine cannot continue to function for long in its current form. A strong leader in such a polarized society will face major unrest, as Yanukovich's ouster shows. The lack of a national consensus will paralyze the government and prevent officials from forming coherent foreign policy, since any government that strikes a major deal with either Russia or the European Union will find it difficult to rightfully claim it speaks for the majority of the country. Now that Russia has used military moves in Crimea to show it will not let Ukraine go without a fight, the stage has been set for very difficult political negotiations over Ukraine's future. Russian-Western Conflict Beyond Ukraine

A second, more worrying effect of the competition between the West and Russia over Ukraine extends beyond Ukrainian borders. As competition over the fate of Ukraine has escalated, it has also intensified Western-Russian competition elsewhere in the region.

Georgia and Moldova, two former Soviet countries that have sought stronger ties with the West, have accelerated their attempts to further integrate with the European Union -- and in Georgia's case, with NATO. On the other hand, countries such as Belarus and Armenia have sought to strengthen their economic and security ties with Russia. Countries already strongly integrated with the West like the Baltics are glad to see Western powers stand up to Russia, but meanwhile they know that they could be the next in line in the struggle between Russia and the West. Russia could hit them economically, and Moscow could also offer what it calls protection to their sizable Russian minorities as it did in Crimea. Russia already has hinted at this in discussions to extend Russian citizenship to ethnic Russians and Russian speakers throughout the former Soviet Union.

The major question moving forward is how committed Russia and the West are to backing and reinforcing their positions in these rival blocs. Russia has made clear that it is willing to act militarily to defend its interests in Ukraine. Russia showed the same level of dedication to preventing Georgia from turning to NATO in 2008. Moscow has made no secret that it is willing to use a mixture of economic pressure, energy manipulation and, if need be, military force to prevent the countries on its periphery from leaving the Russian orbit. In the meantime, Russia will seek to intensify integration efforts in its own blocs, including the Customs Union on the economic side and the Collective Security Treaty Organization on the military side.

So the big question is what the West intends. On several occasions, the European Union and United States have proved that they can play a major role in shaping events on the ground in Ukraine. Obtaining EU membership is a stated goal of the governments in Moldova and Georgia, and a significant number of people in Ukraine also support EU membership. But since it has yet to offer sufficient aid or actual membership, the European Union has not demonstrated as serious a commitment to the borderland countries as Russia has. It has refrained from doing so for several reasons, including its own financial troubles and political divisions and its dependence on energy and trade with Russia. While the European Union may yet show stronger resolve as a result of the current Ukrainian crisis, a major shift in the bloc's approach is unlikely -- at least not on its own.

On the Western side, then, U.S. intentions are key. In recent years, the United States has largely stayed on the sidelines in the competition over the Russian periphery. The United States was just as quiet as the European Union was in its reaction to the Russian invasion of Georgia, and calls leading up to the invasion for swiftly integrating Ukraine and Georgia into NATO went largely unanswered. Statements were made, but little was done.

But the global geopolitical climate has changed significantly since 2008. The United States is out of Iraq and is swiftly drawing down its forces in Afghanistan. Washington is now acting more indirectly in the Middle East, using a balance-of-power approach to pursue its interests in the region. This frees up its foreign policy attention, which is significant, given that the United States is the only party with the ability and resources to make a serious push in the Russian periphery.

As the Ukraine crisis moves into the diplomatic realm, a major test of U.S. willingness and ability to truly stand up to Russia is emerging. Certainly, Washington has been quite vocal during the current Ukrainian crisis and has shown signs of getting further involved elsewhere in the region, such as in Poland and the Baltic states. But concrete action from the United States with sufficient backing from the Europeans will be the true test of how committed the West is to standing up to Moscow. Maneuvering around Ukraine's deep divisions and Russian countermoves will be no easy task. But nothing short of concerted efforts by a united Western front will suffice to pull Ukraine and the rest of the borderlands toward the West.

A friend who grew up in that part of the world writes:===============================================Russia will not try to annex Ukraine. Why? Because it would probably lose the civil war. Fighting a guerrilla war against fighters who enjoy the support of the population is very hard.

Right after WWII, Stalin's regime was all powerful, in every respect. And yet, for many years they were unable to eliminate the "partisans" fighting against them in the tiny Lithuania. Those people were a rather mixed group, ranging from Nazi collaborators to serious patriots, who were ready to give their lives fighting against Stalinist Russia. Eventually, already well into the 50's, the Soviets offered them an amnesty - those who would lay down their arms and stop fighting would not be prosecuted. The "partisans" complied. Surprisingly, the Soviets kept their word, and those people were left to live their lives unmolested. Growing up, we all knew individuals who used to belong to the "forest brothers".

Ukraine would be incomparably harder. A recent poll showed that only 15% of Russians would be in favor of military action against Ukraine.

IMHO, Putin may well lose his job over the worsening of relations with Ukraine. If Ukraine becomes militantly anti-Russian -- grabbing a couple of warm sea resorts on the Black Sea will be a poor consolation. Strategically, that would not make any real difference, since Russia has military and naval bases in that region anyway.

My best guess is that Putin will try to make a deal - Russia would refrain from "annexing" Crimea -- on condition that Ukraine would be encouraged to remain neutral. I think that at this point that would be the best outcome for most of those concerned. To save face, Putin would probably ask for the Russian military bases in Crimea to become permanent - as well as for more autonomy for the region.